Current Market Conditions Posted with May Data

Hey, everybody, the monthly data report peppered with my opinionated commentary, otherwise known as the Current Market Conditions Report, is up. There hasn't been much movement in either sales or prices. They're almost equal to last month. Yes, buyer activity is up, but that won't show in closed sales figures for a month or two. But while activity is up, it's still tough putting deals together and bringing them to a close without hitches, particularly with appraisals and financing, so while I'm anticipating an upticket, I'm not expecting some miraculous surge.

There are some interesting things this month, besides just the monthly reporting of sales and prices. For the latest 3 month period ending May 31st, 36% of the single family closings reported in the Sullivan MLS were foreclosure sales. That's up sharply from prior months. I've broken out the sales prices for foreclosure and non-foreclosure sales.

Also interesting is the almost total lack of lakefront sales. That one's very curious to me, because there is a steady stream of lakefront inquiries and interest, but I've been doing very little in lakefront showings. There's an interesting intersection of shifting demographics and price that may be a factor in the lakefront drop off that I've gone into some detail about this month.

So please check out the latest Current Market Conditions report and drop on back here and leave any comments.

Comments

[Bix]

I think this is the key sentence: "The average sales price for these bank-owned properties was $103,004, comapred to $199,912 for the non-banked owned "market rate" sales."

David, I think it would be interesting to see what the average price a year ago (overall sale price 195K) would have been with the foreclosures taken out. I'll bet it would not have been much higher. Foreclosures seem to be skewing the latest numbers downward in a fashion that is going to give buyers a misleading impression, if they just look at the numbers and don't bother to read the entire report.

[Monte]

Your research is thoughtful but the overall feeling is not good Dave in the second home market - no matter how you spin it.

You mention that YTD sales for the three month time period mentioned are 101 (Y08) vs. 80 (Y09).

That's off by (21%).

However, if you throw in the foreclosure / distressed sales that you posted of 29 sold homes -then it's really 51 non-foreclosed homes that sold in the that three month period of Y09 - or off by:

(50%)

assuming there were no foreclosed homes that sold in the three month time periof of Y08.

You mention that the stock market is up from the March lows.

So?

Do you really think that a pick up in the equity market will translate into a resurgence in the second home market?

The SP500 is still off by 31% from June of 2008 through this past Friday.

Many have now embraced the mindset of going from being big spenders into being more fiscally responsible and frugal.

Yes. Let's escape the heat, smell and noise of the city this summer and buy some garden sweet tomatoes and rampe - but buy?

What's the hurry?

Honey, we'll RENT a place in the country through the internet (no school / town taxes, insurance, mortgage, oil bills) - and not buy just yet - and see how the cards fall this coming winter.

Monte

[David Knudsen]

Bix, I agree that foreclosures are skewing the price downwards. But I don't think it's the only factor. Even among 'market rate' buyers, there has been a noticeable shift to more moderate, lower priced houses. And at the lower end of the spectrum, investors who may have purchased non-foreclosure properties a year or two ago (to either put into the rental market, or fix up and flip), particularly if they're cash buyers, are now almost exclusively focused on finding foreclosure bargains.

Monte, some folks will certainly decide to wait to buy. But not everyone wants to rent. And it's not as simple as just making a decision to rent rather than buy, because the inventory of attractive rental homes is very limited (and demand this year, because of the factors you mentioned, seems higher.) In May, I probably fielded a couple of dozen inquiries from folks looking for summer rentals, but unable to find what they're looking for.

People's motivations are different, and they're not always financial. I haven't rented for over 15 years, and have owned 2 primary homes and 3 second homes in that period. (Not all at the same time, mind you. I may have a bad real estate jones, but it's not that bad. I've only owned two houses at a time.) Of the 3 houses I sold (which were bought for personal use, not investment), I made a lot of money on one, lost a little money on a second, and broke even on the third. So maybe not the best purchases overall from an investment standpoint, and I may have come out better had I rented in some cases, but for me that wasn't the point. I liked owning them, being able to say "This is my place." And being able to tinker with it to my heart's content.

[cfranch]

I have a very jaundiced view of real estate reports and reporting. I take all with a huge grain of salt. Here is an excellent reason from 2007:

http://www.nytimes.com/2007/08/19/realestate/19cov.html?_r=2

All the usual bull crap about Manhattan RE is here: foreigners, empty nesters and parents of spoiled brats buying apts we need to live in; big price increases coming, rents rising etc, interest rates at historic lows(they weren't).....

I think many people have been burned by the experts for so long they trust no one and are loathe to buy. Who can blame them? One depends on the NY times for solid reporting. When it comes to RE however their RE section is a wholly owned subsidiary of the industry it purports to cover. Just a disgrace.
Thank heavens for sites such as trulia.com, streeteasy.com etc. The democratization of RE info will be good for everyone, brokers included.

[romeo]

You betcha.

cfranch, wow.

That's a real _prescient_ article published in The New York Times just two months before the SP 500 topped off in October of 2007 and before the financial bowels of Gotham caved in for good in 2008!

Think of those that actually purchased in New York City in 2007-2008!

The internet is a wonderful aid.

romeo

[David Knudsen]

Yet again, the bias surfaces on here that the "experts", i.e. real estate brokers, manipulated the market, hyped sales and led innocent lambs to slaughter — and that having supposedly 'unbiased' data widely available to consumers would have led them to make different decisions. So how do you account for the fact that NYC has one of the most comprehensive and up to date publicly accessible property information systems in the country, ACRIS? It does lack some information, like square footage for coops (to enable easy price per square foot calculations), but you can make relatively good comparisons by knowing the lines in a building.

Buyers and sellers ultimately make the market. Real estate brokers facilitate it. In 2007, there was a land rush in real estate, pardon the pun. Buyers wanted in. There were more buyers who wanted to buy than sellers who wanted to sell. Prices went up. There was this widespread belief among buyers that any real estate purchase was a no-risk, sure fire bet to make money.

I'm not saying that real estate brokers didn't contribute to the frenzy. Back in 2006/2007, there was this almost desperation among buyers to find a place. I'd keep my ear to the ground to pick up even the faintest hint that an attractive new listing was coming on the market. I'm sure Manhattan brokers were doing the same thing. Heck, I remember reading stories about getting text messages in the middle of the work day to "Come now. An apartment in the line you want in that building just came on the market." Brokers weren't manufacturing shortages by telling the potential seller of an apartment to keep their property off the market for a month until there were no other apartments available in that building — because likely there were no other apartments available.

Also, the idea of labeling Manhattan buyers (who have incomes to afford $1M+ apartments) as somehow innocent and naive, and able to be led to slaughter, is absurd. Those buyers that ran up the Manhattan market were educated and well off. They're not the more financially naive and less educated buyers that may have gotten manipulated into subprime deals they could ill afford. I would venture that Manhattan buyers are among the shrewdest and most financially sophisticated in the world.

The idea is floated widely that the greater availability of information will empower consumers and stabilize markets. I actually am a proponent of comprehensive real estate sales data being more available. I'd like to see Sullivan County's Office of Real Property put up an accessible property information website like ACRIS in the city. But that still has only limited use in an area like Sullivan, where there is such great variability in property.

[cfranch]

Bubbles form when everyone is convinced this time is different. We saw this with internet stocks, commodities, treasuries and real estate, all in the past decade. Everyone contributes to it. I would expect the media to cast a jaundiced eye on this but they never do. Those same Manhattan buyers with 6 figure incomes were buying internet stocks with absurd valuations and no prospects for earnings. When emotions rule, intelligent decision making suffers.
Yesterday's NY times lead real estate article was basically a replay of the article I cite above. Some of the same brokers are quoted almost verbatim from what they said in '07! Can you blame me or anyone else for, at the very least, rolling our eyes?

Dave I like your blog. I think your insight is very sharp. But you have to admit that many in your profession are permabulls and care little for buyers. This is their livelihood, no sales=no income. And they fed the bubble beast too. Greedy buyers were also in a "something for nothing" mode and deserve the hit they've taken to their bottom lines. My own personal experience with brokers in Manhattan has run from the completely unscrupulous to the barely honest. So I am a little biased. You seem cut from a different mold. If I were you I would market that aspect but I suspect most of your clients and readers get it.

[David Knudsen]

Wow, cfranch, did we read that article in yesterday's NY Times differently:

http://www.nytimes.com/2009/06/07/realestate/07cov.html?ref=realestate

While it dealt with Manhattan, I thought it pretty accurately the roller coaster shift in buyer sentiment — and market activity — over the past 12 months. Market tanks with sales off 60%, buyers won't "pull the trigger", as a result prices fall by as much as 30%, enticing buyers back into the market. I think that's pretty straightforward capitalism. Demand falls --> prices fall -- demand rekindles.

The demand pick up is also pretty classic, starting with the lower end properties and working upwards. And the writer kept peppering the article with questions about the causes of the pickup, whether it's seasonal, the result of pent up demand, or the result of lower prices. (Most likely, a combination of all those factors.)

[Rod]

Doesn't cfranch's description of the motives of real estate professionals apply just the same to any salesman, anywhere? Buyers can say yes, or no - but the salesperson has a goal, and that is to sell something. Any buyer who forgets the agent represents the seller is definitely at a disadvantage. I mean, in NY they go so far as making you sign something so you are reminded the sales agent works for the seller.

[David Knudsen]

au contraire, rod. The agent doesn't always represent the seller. I represent buyers! But in 99% of the cases in New York State, I agree — the person a buyer typically interacts with is the agent of the seller.

[Nick]

David has a lot of posts elsewhere on this site about the difference in working with a buyers agent. As someone who has, quite happily, I would say it's not all hot air.

Granted, just like any agent a buyers agent works on percentage, so they have a preference to getting deals done, and to some extent a preference for higher prices, even if the represent the buyer. That's just the law of incentives. But my gut feeling having been through the process is that the bias is much more just to close the sale, rather than to worry about 5-10% additional commission. There's a big difference between closed and nothing, and in my feeling that difference is so much stronger than the minor price issues that it governs. For some, like David. Not all are as the same.

But David's point about Manhattan real estate buyers is well taken, and it should apply to us second home SC types as well. At the end of the day it's you buying, not the agent. You have to set parameters for affordability, what you want, etc. And be willing to walk when the deal just isn't there. A good agent (like David) will happily help you do that, won't pressure you do do something you don't want to do or be difficult if you just have to hold a line or walk away from a deal that can't be reconciled. And provide a TON of information both on this site and in person to help you ascertain what your options are. But at the end of the day it's me spending six figures and not anyone else. You take every interaction with a grain of salt. Contractors want more money and more work, agents want to close the deal, etc. Hell stockbrokers want you to invest more money. But good ones are good, even if those incentives remain. As the buyer you have to take some responsibility, the buck stops with you.

I have nothing but antipathy for mortgage brokers that prey on the elderly and so on. But as that great NYT magazine story showed even a hard nosed business reporter is not immune. People want something for nothing and many took foolish risks during the bubble. All were deceived, but many were deceived by themselves.

Just basic stuff, set a price and stick to it. Be realistic and not emotional. Do your homework. Get two estimates for everything that costs more than a grand or so. Not too complicated. Of course we all have different incentives. Every time you buy anything this happens. Big deal.

This is prompted by the comment about "permabulls" which I think is unfair. David has called it like he sees it. Of course he's naturally optimistic about SC real estate. I would hope so, would be a tough life if you were always down about the thing you do all day. But when it's bad he says so. It's abundantly clear and why I'd recommend this site and him to anyone, and have. The generalization seems unfair.

[David Knudsen]

There's an important point about the real estate compensation model in Nick's post. Compensation for real estate agents is almost without exception contingent on a sale. Both sellers and buyers can use our resources essentially "free of charge" — listing and marketing properties, gathering information about properties, showing properties, touring the county, etc. The only time we have a pay day is when a sale actually closes. So, if a listing agent has 10 listings, but only 2 sell, those two effectively subsidize the marketing and overhead for the 8 that don't. On the buyer side, of the potential buyers I actually go out with to look at houses, somewhere between 1 in 5 or 1 in 6 end up closing on a sale with me. So that one essentially 'subsidizes' the others.

It's not a system that breeds efficiency. But various attempts at "fee for service" models, with upfront costs to buyers and sellers, have generally failed to gain traction with consumers. On the buyer side, if I charged $75 per hour for taking buyers around to see houses, and then a flat fee to negotiate a deal and another fee to handle that deal through to closing, I wouldn't have much business. Likewise, on the seller agent side, if sellers had to pay an upfront listing fee, plus a monthly fee to have their house on market, and another flat fee to handle the transaction, seller agents probably wouldn't have much business, either.

There is an upside to the current model, for both buyers and sellers. If we were paid whether or not a transaction closed, there wouldn't be a whole lot of motivation to stick in there and keep a deal together when the going gets rough. There is a widespread misconception that real estate agents show a few houses, make a deal and then sit back to collect a big fat check. That just isn't how it happens. There are a huge number of moving parts to a deal, particularly for houses in the country. One of the values of a good broker here, whether on the seller side or the buyer side, is that we have enough experience to come up with solutions to the inevitable issues that pop up.

[cfranch]

Dave- I guess your glasses have a rosier tint. Yes the article reports on the facts of what happened to NYC RE. However when it comes to the meaning of the uptick we've seen or future price prospects, everyone quoted is a broker who basically sounds the all clear siren. Only the guy from the appraisal company has any cautionary tale to tell. Are we to believe every broker is bullish? How about quoting someone who predicted this crisis? This isn't reporting, it's advertising.

[keith]

Sullivan County makes the Times.

http://www.nytimes.com/2009/06/09/opinion/09herbert.html

[David Knudsen]

Thanks for the post, Keith. (It's about the Hudson Valley Fois Gras factory in Ferndale, and the workers who work there.) Personally, I think fois gras is to food what Imelda Marcos was to shoes.

[Helen K]

I own outright a large parcel in Mamakating.
For the last year, I have been wanting to have a Westchester Modular built on my land. WM deals with various banks and two of them (M&T, Hudson Valley) explained to me nicely that Sullivan is kind of depressed and very difficult to appraise. I have 820+ fico and they basically denied me financing!

This is a true sign of the times.

[Rod]

Try Jeff Bank, or Ulster Savings. Chase gets it done too.

I've seen the same thing recently, with the area as a whole being denied financing - which I thought was very strange underwriting criteria.

[Jramon]

I disagree, and for one reason only you under score someone who wish to sell there property at a profit because of your opinion.
Opinion are like noses everyone have one, the real question is what makes you right? I see the future of Sullivan County and I'm prepare to stake my claim on it, and it is the new Hampton's. I'm not willing to be discourage by a so-called professional realtors who is looking to do business on a every day basis (not meant as an insult), when I on the other hand have and own a piece of property(which is a sale by owner) that I wish to sell for a great deal of money in spite of your projection.

I believe if everyone was like minded and marketed our area (Sullivan County as the place to be) as other's do their resorts and countries promoting and creating their market instead of saying what we are not,I'm positive I could get my asking price, which I think is fair for what I'm offering, and so could other's. I have almost 40 acres in a small residential hamlet just above the Delaware River with stonewalls, meadows,and fresh spring water that comes from beneath the ground 17 different types of hardwood and 3 different type of softwood, stone watershed,it's breathtaking...

I'm sorry David,your dead wrong and repeating it (your opinion) will not make you right. It will only keep me from getting and/or make it harder for me to get my asking price! I know the value of what I have. Thank you.

PS Instead of forecasting doom w/your opinion, and instead start singing the praises of Sullivan County I'm sure your business will also improve!

[Polly]

Jramon writes on June 11 2009 at 05:16PM...

"I'm sorry David,your dead wrong and repeating it (your opinion) will not make you right. It will only keep me from getting and/or make it harder for me to get my asking price! I know the value of what I have. Thank you."

------

Jramon - are you selling?

And if so - why?

Polly

[George]

Jramon,

I can offer you 1500 per acre all cash.
If you have a higher offer, take it and run.

[Thinking Ahead]

Sheesh, we go from having David castigated for being too upbeat to now being too doom-and-gloom. You just can't win!

Jramon's rant was most illuminating in this statement: "I know the value of what I have." The key question there, as always, is what buyer he/she can convince of that. Hard to judge by one post, but it definitely seems Jramon is not in any mood to negotiate. Sounds less like an "asking" price and more like a "demanding" price -- and that could quite easily be the real reason his/her property remains on the market.

Somehow I think David is not the one refusing to see the forest for the trees (all 20 hardwood and softwood varieties)!

[BuddyLister]

It's amazing at how subjective having a house in the country is.

I know folks who would not want a place in the catskills even if it was given to them for free. Yet, other city-slickers are stupid enough to pay 105%+ of the asking price.

Most sellers are city slickers themselves, so they ask top dollar thinking another fool will come along and take it for their internal organs.

[David Knudsen]

and some folks would pay $1,000 for a Mets playoff ticket, but I wouldn't take it for free. I guess perception of stupidity is in the eye of the beholder.