The Two Sullivans

With May coming to a close, I started purusing the sale data this morning for the next Market Conditions Report. As I was scrolling through the individual sales over the past few months, I was struck by the number of bank-owned properties in the closed sales list. 23 of the 80 single family sales reported in the Sullivan MLS for the 3 month period from March 1 through May 31 were foreclosure sales. That's 28.75%! That means there were only 57 non-foreclosure sales over that same period. Figure that a few of those were short sales (there's no way of divining that from the MLS sales data), and add in the couple of estate sales, and we probably end up with only about 50 "market rate", or non-distress sales.

In looking through the foreclosure sales, it became apparent there are really two different Sullivans. Only 7 of the foreclosure sales were "west county" (generally thought of as the river townships, plus Callicoon and Bethel). 3 of those 7 were the Parsons/Barriger foreclosures above Callicoon, which are weird outliers because of the convoluted circumstances. Of the other 4, one is in Smallwood, one on Park Rd. in Yulan, one in town in Narrowsburg and the last on Deceker Road in Glen Spey.

All of the other foreclosures were in the central and eastern reaches of the county, east of a line running from Livingston Manor through White Sulpgur and down through Mongaup Valley, including properties in Parksville, Grahamsville, Liberty, Monticello and Woodridge. There doesn't appear to be any single area of concetration — when you're looking at 16 sales (23 minus 7) spread over 7 townships.

The foreclosure sales market is pretty rough and tumble, down and dirty. Most of the properties are lower end, often in "fair or poor" condition, and are sold "as is." Purchasers tend to be savvier investors looking to repair them and rent them out, rather than for their own personal use. Some buyers are looking to fluff them up and flip, but that's riskier because it relies on buyers being able to buy them.

The post title, "The Two Sullivans", isn't just about geography, but rather that there are presently two very separate and distinct real estate markets — the bargain-shopping, investor driven foreclosure side and the "market rate" side. When you pull foreclosures (and short sales) out of the total volume, the meager sales volume on the "market rate" side becomes even more striking.

Another interesting note is that while foreclosures accounted for 28.75% of sales during the most recent 3 month period, they don't comprise anywhere near that share of the inventory. In fact, of the 1,080 single family homes currently listed in the Sullivan MLS, only about 1.5% are bank-owned. Clearly there is a robust appetite for anything "bank owned", because when they come on, they generally sell pretty quickly (which is why, at any given time, there are so few listed.)

Comments

[ar]

This is the second time that you've referred to the sales of the brand-new houses up the mountain overlooking Callicoon -- the so-called "Parsons" houses -- as "outliers" based on unspecified "convoluted circumstances" -- or words to very similar effect in the prior reference. The"outlier" designation seems to be an effort to downplay the significance of the sales prices for these houses for the overall market; if these prices were "market" prices, after all, that would be bad news for a lot of current sellers and the brokers trying to earn commissions from them. Use of the phrase "convoluted circumstances" is intended to justify calling these sales "outliers", but here the logic of the argument breaks down. What, exactly, are these "convoluted circumstances" apart from the fact that Froehlich Road is a steep road (though one that any number of other residents negotiate year-round; it's not just one part-time resident, Dave). I believe if you go back to your prior post in response to my question on this, you admitted that in fact you weren't fully informed about the ownership/financial history of the houses after they went into foreclosure. Can you give us any more details about the "convoluted circumstances"? In fact, it seems clear that each of these house was exposed to the market for lengthy periods, and the prices at which they ultimately sold were the best the seller could obtain after many months (if not a year or more) of effort. That doesn't make the sales "outliers" (and doesn't it seem especially a stretch to use the term "outlier" when we're talking, not about a single sale, but about THREE sales of three different houses). Rather, it makes the sales a reflection of the market -- regardless of whether the seller is a bank, an estate or anybody else, when you spend months if not a year or more trying to sell a house, and X is the most you can get, X is the market price. When you do that with respect to THREE houses, the suspicion that this is the market is even stronger. I'm open to being shown how my logic is flawed, but vague and unspecified references to "convoluted circumstances" don't tell me anything. They seem simply to try to discount the significance of three recent sales so as to minimize impact on comparable calculations and buyer expectations.

[David Knudsen]

ar, my point about the 3 foreclosure sales above Callicoon being outliers isn't about their prices, but rather that new construction / spec houses in western Sullivan County aren't 'typical' foreclosure inventory, but rather outliers to the types of houses one can expect as foreclosure sales --- in terms of both location and type of house. I made no reference to their sales prices whatsoever. Every other 'spec' house in western Sullivan that I'm aware of has sold at "market" without the investor/builder going into foreclosure — even though that "market" price was likely well below what each of those builder/investors expected to get.

Regarding the 'consoluted circumstances' of those 3 houses, there are quite a few besides the road that you state is not an issue (but I question whether you've actually driven it in the winter. I don't believe there is anyone living beyond these three houses year round on that road.)

First is the ownership/foreclosure situation. There has been one foreclosure and one "something else". The developer was foreclosed on by the investor. I use the term "something else" for the investor (a Barriger fund) because I don't know exactly what the status there was, whether it involved insolvency or bankruptcy of a specific fund or a company or whatever. Given that I don't know the circumstances, or the relationship of the selling entity, Motel99 LLC, to Barriger, I can't authoritatively write authoritatively about the chain of ownership following the original foreclosure.

But beyond the financial mess, there were other circumstances that have been clouds over these houses. For most of the entire time they were exposed to market, there was the sceptre of NYRI running through or adjacent to the properties. (Only after the 3 sales this year was NYRI 'killed'.) And then there was the Millennium gas pipeline running through or adjacent to the 3 houses. Add both of those in to the access issue, and there's been some understandable hesitancy among buyers to purchase these houses.