What's Moving

Believe it or not, parts of the market are pretty hot. Moderately priced smaller farmhouses or charmers on a few acres on quiet (not main) country roads are moving pretty well. I've been surprised in the last month, when I call to check on availability of houses in this category, at how many have deals on them. (Here are 5 that are in deals or contract.) The deal prices range from the upper $100's to the upper $200's. There are also a couple of non-MLS properties in this range that also have deals on them. There are also a scattering of deals in the mid $300's for larger houses with more acreage or with some special feature like a killer views. But overall, the hot spot seems to be the $200K range.

I've been getting a lot of calls for little cabins in the woods in the $150,000 range. That's a category, though, where there just isn't much available here in Sullivan. Requests are also picking up for lakefront houses, but at very moderate prices. I'm not seeing much actually moving in lakefront because of the pretty wide price disparity between buyers and sellers. One reason I think the moderate priced country charmer segment is doing well is that there has been enough activity to instill some pricing confidence. We just don't have that yet in lakefront, making it difficult for both buyers and sellers (much less lenders and appraisers) to determine value.

Comments

[Bix]

David, I'd be curious to know the so-called "bid ask spread" for these houses. That's been a subject of some discussion in the past as you know..

[Rod]

All very nice looking, well-priced houses - something the market inventory was sorely lacking for a few years.

Also, bid ask spread, and original price would be interesting.

[David Knudsen]

The original asking price is on each of the listings, in the detail section. In terms of bid/ask, the fianl sales price isn't made public in the MLS until closing. However, from what I've been able to ascertain about these sales, all are selling at 90% or better of asking price, most in the 93-95% of asking price arena, and one, I believe, is selling at about 98% of ask.

[Bix]

That doesn't surprise me.

[Hellen]

http://www.time.com/time/business/article/0,8599,1905085,00.html

[Danny]

Here is what is NOT moving. An email response to me this afternoon:

Dear Mr. XXX,
Thank you for your inquiry. Unfortunately, we are not doing any residential construction lending at this time.
Sincerely,

Jewell M. Brain
Senior Vice President
Hudson Valley Bank

[DN]

I think with the activity in the high 100Ks and 200Ks, it shows that sellers should be mindful that buyers want good value and sellers shouldn't "test the market" in the hopes of getting 2006 peak prices.

[Klinger]

Mucho Busy Mucho Mucho Mucho Busy

[Bix]

DN, that's true, but I'd be curious to know how prices have shifted in this segment of the market in recent years.

I was looking in that neighborhood, very roughly speaking, a year ago and I see no significant change.

[q]

They all share one thing in common. Crunch the numbers again. No one here has commented on this as yet.

[ar]

25313 is an example of how misleading the "original price" listing information can be. In fact this one was listed for a long time on Freda at $299K, then came down rather dramatically in recent months. the listing of "original price" at $225,000 compared with the sales price to be inferred from Dave's post gives a skewed picture. It is, however, interesting that this one sold at all, given that it is on a major road (between Hankins and Roscoe), with no substantial setback and with land that slopes up rather sharply behind. An interesting fact to know would be how much the seller put into the renovation, which looks great in the photos.

[compo]

I agree 25313 has been nicely renovated and it is very close to a busy road (probably not more than 25 feet from the road). The current parking is along the road; there is no off-street parking. There is also not much useable land so the 10 acres is deceiving. I took a look at it and I actually liked it but not at close to the asking price. It is a beautiful house tastefully renovated and the area is very nice but I think the buyer outbid himself.

[Bix]

That's listed at 218K, at least now.

[Bix]

Sorry, didn't read the listing carefully. Yes, your point is well taken.

[Rod]

I thought Dave was trying to be transparent with the reference to 'original sales price' in his above post, but if ar is correct, then it's obvious he was misleading his readers by implying the original sales price on the listing was actually the original sales price when the house came to market.

Does this mean in his last market report when he did list original asking to sales, he was only referring the most recent 'original asking', not really the original asking price?

On numerous occasions, David has balked at supplying original sales price, which to me, is the real indicator of market activity.

David, is ar correct?

[David Knudsen]

It's hard to track the original-original-original asking price, as listings expire, are relisted, move from MLS listings to non-MLS listings. It would require a lot of hand work. If folks out there want to pay me $5,000 a month to do nothing but track listings from one version to another, to make sure the data is perfectly accurate and meets your criteria for total transparency and accuracy, write me a check.

The MLS lists original sales price for the latest version of the listing. I did nothing other than relay that information by linking to the listing.

By the way, when a client of mine is actually buying something — other than the pundits on here who generally aren't - I do research back through all versions of the listings to formulate a listing and price history.

[David Knudsen]

And compo, there is 'off street' parking for that property, at the bottom of the stairs. There is also a curb cut to a grass drive that goes up to a plateau between the house and the barn. And while you may have not been interested in it at 'close to the asking price', there were a number of buyers who were, when the asking price dropped to $218K. So just because it wasn't your cup of tea doesn't mean that the current buyer 'outbid themselves'.

[David Knudsen]

One difference we seem to have is that I consider original asking price somewhat irrelevant, more of a curiosity. Buyers make offers based on the current asking price. The most important aspect of the original asking price on that house (which, I believe was somewhere in the $300's when it was listed with the Rural Connection, before being relisted with Freda t $298K) is that it didn't get serious action until the asking price dropped to $225K (and then finally $218K). That supports a point I've made over and over, that houses don't get action and sell generally until their asking price drops to within about 15% of what a buyer is willing to pay. That was absolutely the case with this house.

One reason I balk at 'original asking price' is because I don't think it's a particularly accurate number. First of all, I don't think it tells you much. And I don't think it's all that reliable (for the reasons I've mentioned.) The other thing about 'original asking price' is that property features can change through the life of a listing. Say a farmhouse on 30 acres is on the market for $499K. Then the owner subdivides off the house on 17 acres and puts it on the market for $399K, and the remaining 13 acres on the market for $100K. Has the asking price on the house dropped 20%. (This listing history will show that it did, and it would take a pretty astute eye to notice the acreage difference.)

A seller has a small farmhouse on the market at $179K. He decides to do some pretty substantial upgrades and when he's finished, raises the price to $191K. With the upgrades, should the original asking price be $179K or $191K?

A house was on the market 4 years ago for $829,000. It didn't sell, and came off the market for a couple of years. Last fall it went back on the market in the upper $400's, and had a number of price reductions to the upper $300's. Should the original asking price be in the upper $400's, or should it be $829,000, when there was a gap of a couple of years in the listing?

If a house is listed at $199,000, then goes into foreclosure and is put back on the market by the lender at $139,900, is the original asking price $139,900 or $199,000? The owner has technically changed, but there hasn't been an intermittent arms length sale.

[mathew]

Dear David,

I think the scenarios you point out are plausible but not probable. I don't think the differences in asking prices/selling prices of the houses you mentioned or the 298 to 218 house had anything to do with subdivisions and being off the market for years. The difference in asking price and selling price - an over 1/4 difference in the two - is a reflection of the market and times we live in. We are approaching 10% unemployment, savings have been wiped out, etc, etc, - people are not buying. And if people were buying they want the 150,000 cabin, which at this point, as you point out doesn't exist. I in no way take any solace in this info, I am not some name changing contributor trying to wreak havoc. I think you are amazing, and the service your provide is stellar. However, I just don't know anyone in my sphere of friends, co-workers and family who are looking to drop 250 - 400 on a second home right now. People are too worried about their families, and insurance and their job security. To quote you - "For christsakes" GM went under - no job is safe. My 2 cents.

[compo]

Dave,

It appears you may have represented the buyer from your response to my post. I hardly think a place to park a few cars along the road constitutes off street parking. From what I recall it was just dirt parking for a few cars. Secondly, the curb cut you mention would still cause you to drive over 300 - 400 feet of grass to park your car at least 75 feet from the residence and you would have to climb down stairs that probably drop 50 feet over a 25 foot length. That could be a lot of fun in the rain, snow and 15 degree weather!

[David Knudsen]

mathew, I was just pointing out the challenges of tracking an "original" asking price as a listing moves over time on and off market, between different brokers, through changes in property specifications, and through relisting through the same broker (with a lower price and 'fresher' listing date.)

The house didn't sell when it was listed at $298K. Or when it was listed at $279K. It didn't get a deal until the listing price dropped to $218K. The current buyer made their offer based on an asking price of $218,000.

I don't know what the big deal is here about 'original asking price'. Some months I do calculate the ratio of sales price to original asking price (as stated in the most current listing). But as has been pointed out here by Rod, that aggregate figure can be misleading, because it's only based on the starting price for the most current listing.

[Rod]

David - the examples you point out are well-taken but not the norm - the norm in original asking price reductions for a smart/motivated seller is a continued recaliberation of the asking price, in somewhat rapid succession, over the course of 12months.

$525k becomes $499k, becomes $435k, becomes $399k becomes $365k. Now that is interesting and important.

And the only reason I point out that the MLS original asking price is deceptive is because you mentioned the spread of asking to sales price each month - what's more important that ACTUAL time on market, and ACTUAL original sales price? If a piece of land has been on the market for 6 years, through various brokers - that's a lot different than something that was listed yesterday - although you would never know it from the MLS listing, or many times from a realtor.

And I agree with you David - it's a very hard thing to track - that's why I think it's better left alone, not as a baseline measure of what the market it doing, as your last few reports have done. You mentioned buying stocks as an similar example the last time we had this go-around - but it only takes me 3 minutes to know exactly what price a stock was offered for at any point in the past - in real estate, this is purposely cloaked in shadows. It's what they call a stale listing, and realtors/sellers purposely pull things off the market and relist them to 'freshen them up'.

Matthew - people are buying, and they are not only getting really good deals, the mortgage money is close to free, in terms of a historical comparision. Like the guy in the Times said yesterday, even serious storms only drench some of the people.

[David Knudsen]

compo, I was just correcting your statement that the current parking is "along the road, there is no off street parking." That dirt pull in is definitely off-street; it is on the property, and I've been in there with 3 cars. It might not be the type of off street parking you'd like, but it is off street.

No, I'm not representing the current buyer. That this house isn't 'your cup of tea' is a factor of you having different criteria and priorities than the person buying this house. Being set back further off a road, with easier access between car parking and the house, and more level usable land, may be higher priorities for you. As I'm not working with these buyers, I don't know what their prioties are. It could be they liked the renovated kitchen, or they're artists and having the big barn to work sealed the deal. Maybe they liked being a short drive from Crystal Lake, needed cable for high speed internet for work (something that isn't always available at farmhouses on back roads), or their best friends have a house nearby. Or the house is larger than any other farmhouse they could find for the price and they thought it was the best value. Who knows. But their priorities are just different than yours.

[David Knudsen]

Rod, we just disagree on this. I think the average bid/ask spread for closed sales is an important number. A lot of buyers have this idea in their head that most houses are selling at 50%, 60% or at most, 70% of their asking prices. (And they're thinking 50%, 60% of 70% of the current asking price, not the highest ask price over the course of the listing history.) Sure, a few houses do sell at 50%, 60% or 70% of their asking price, just as a few houses sell at 98% to 100% of their asking price. But neither is the norm.

If the bid/ask ratio was 70% here, then regularly floating offers at 50% of the asking price as a starting point might be productive. But for the last 6 months, we've hovered in a range of 88% to 90%.

Let's take a hypothetical seller with their house listed at $299,000. Psychologically, with that asking price, they're thinking of a bottom line somewhere between $270,000 and $280,000. The market for their house may be somewhere between $200,000 and $220,000. That $299,000 asking price telegraphs to me that hell is probably more likely to freeze over than being able to do a deal at $210,000.

The data, month after month, bears that out. Houses generally don't find buyers and get deals until the asking price is lowered to within 10% to 20% of what the market, e.g. buyers, see as the property's value. If that seller lowers the asking price to, say, $239,000, that indicates a reasonable likelihood to do a deal in that $200,000 to $220,000 range.

Over and over again, I have experience with listing agents encouraging me to show a house that, in my opinion, is pretty overpriced, with the plea to "Bring an offer, the seller is negotiable." And every time it's futile wheel spinning. I've been involved in about 20 negotiations since the beginning of the year, some on 'overpriced' houses, and have yet to find a seller willing to do a deal at 30% or more off of their current asking price. I've done a number of deals at 30% or more off of their original asking price, but in those cases, there has been a substantial intermittent price reduction by the seller that has brought them within that psychological deal price range.

[Rod]

David - in a way, we are saying the same thing - I agree that sales generally are happening at 10%-15% of 'final' asking price - as a believer in your attempt to paint a true picture of the marketplace, any time you say 'original' should come with a big asterisk that notes your definition (or more accurately, the definition of the MLS) of "Original'.

It seems that 'original' in real estate parlance means the following - 'original listing date', or 'most recently relisted date' - what it doesn't seem to mean is 'the original date a seller began to attempt to sell their house' , which I think to most non-real estate people, is exactly what the phrase 'original' applies. It wouldn't be hard for the MLS to list all previous 'listing agreements' on the listing, but that, of course, would level the playing field to much for the MLS mafia.

[David Knudsen]

Good point. Anytime I refer to original asking price, I should make that clarification. It has come before the MLS Board, by the way, to include original listing date and listing price in any listing that is relisted by the same agent/broker, but that was not adopted. That would be a first step. I think it would be reasonable to require disclosure of the highest asking price within, say, the last 12 months, whatever the source of that listing if there was no substantive change in the property specifications, e.g. a reduction in acreage.

There's been a very interesting thread on ActiveRain recently about Why Buyers Don't Trust the Real Estate Industry:

http://activerain.com/blogsview/1110609/why-buyers-don-t-trust-the-real-estate-industry

that focuses on withholding or controlling information. The blogger who started the thread, Brian Brody a mortgage broker in Virginia, makes the case that the offer history on a house — offers submitted and rejected, and the reasons why, should be part of the MLS record. I support the idea wholeheartedly, but it's interesting to read through the thread comments to see the tremendous resistance from Realtors.

[Rod]

David - in your above post you mention 'relisting by the same broker'. Question, - when a listing expires - 3, 6, 12 months after seller signs it - and the seller relists immediately with the same broker, the 'original listing date' now publicized is the date of the relisting, not the date of the original listing? Any insight would be great.

Great thread on Active Rain.

[Sooth-Sayer and Frequent Name-Changer]

Any realtor is going to resist transparency (towards buyers).

In the medical profession, the lack of transparency has been the norm since the Big Bang...why do you think healthcare costs are increaing at 9% rates per year?

On wall street, must we discuss the motives behind opacity?

Transparency is the enemy of capitalism, optimism, free open markets, where people spend with a bias towards hope and perceived value. We live in the good ol USA, where you can sell ice to an eskimo!

As long as transparency is alive, you will have a European-like economy; where people have a bias towards mistrust with the seller; no hope, no optimism.

p.s. Did you know that it costs a phone company close to nothing to transmit text and phone calls? Yet, you receive a $100+ cell phone bill each month. WHY?

[Friday910]

I can't speak for all realtors, but there is at least one realtor in Sullivan who has no problem providing the history of the properties, when asked. The history of the property, coupled with David's monthly statistics is enough transparency for me.

But my question to all the sellers and realtor is this... how does a seller expect a realtor to find a buyer when the current asking price (based on MLS) is significantly higher than what the seller paid for (based on property history) during the peak (2-3 years ago) of the real estate madness (based on David's statistics)? Can anybody come up with any justification for such a scenario?