A Three Year Supply — What It Means

For months now I've been turning over every rock looking for signs of recovery. There have been some. The median sales price for single family homes in the Sullivan MLS has crept up from $132,000 in March to about $150,000 today. Monthly sales have risen from steadily from the low of 17 in April to 41 in July. (With 3 weeks of August under our belts, it looks like this month will come in weaker.)

Since the beginning of the year, we've averaged about 32 single family sales per month reported in the Sullivan MLS. For the sake of argument (and taking into account some seasonal variation), let's round that to 400 per year.

At present, there are 1,168 single family homes listed for sale in the Sullivan MLS. With just 400 (or maybe 450) annual sales, that translates into 2 1/2 to 3 years of inventory on the market. Some of the inventory here falls into the category of 'perpetually on market and virtually unsellable' because of condition or location. Unlike Manhattan, where every apartment on the market could likely find a buyer at the right price, that's not the case here. But even if we lop off a third of the houses as virtually unsellable, that still leaves about 2 years of inventory. In contrast, during the peak we had a similar number of houses on the market, but sales were about twice the annual rate.

The bottom line is that we have an awful lot of houses chasing a small universe of buyers. More supply than demand is pretty much the definition of a buyers market. I don't see much happening on the seller side to reduce supply. On the buyer side, the only way I see to stimulate demand is through price. There are buyers in the market, and in my experience they are willing to buy — if they perceive they're getting a very, very good deal. But so far, sellers aren't singing out of the same hymn book. The average asking price has dropped only 7% since January, while the median asking price has actually risen 2%. Buyers seem to be waiting on the sidelines for bigger moves and much better deals.

Comments

[DN]

Maybe it would, in the longer run, be better for all if the market prices in SC dipped more sharply and "got it over" with so to speak. Seems like we may now be stuck in holding pattern where transactions slow unless the economy takes a decisive turn for either the better or worse.

[ar]

Put this post together with the one a few items down celebrating the fleeting fad of the "New Catskills" and you get a fuller picture of the devastation that results when fashion and hype infect a real estate market. How many millions of dollars were incinerated in purchases during Sullivan County's 15 minutes of real estate fame? That money will never, ever come back to the buyers because the boomlet was unprecedented in the history of the county, not merely an "uptick" in a recurrent cycle of ups and downs. The lesson for today's buyers-to-be is to be very wary of the lure of marketing and promotion; the resale value of advertising themes and images is zero once the smoke dissipates. But it was a masterful show while it lasted; the promoters spun every drawback into a virtue -- it's great that we have no stores or services because that harkens to a simpler, more "authentic" lifestyle; we're cheaper than any other second-home market within a couple hours of Manhattan but don't ask why. It was the briefest gold rush, and no doubt it put some gold in the pockets of real estate brokers and builders, but the market conditions reported in this post attest to the damage done to the balance sheets of those who were encouraged to "feed the dream" and took the bait.

[Thinking Ahead]

Somehow I can't feel bad for the typical second homeowner's balance sheets that perennially-depressed AR refers to. They obviously had discretionary dollars -- so what if they overpaid? I highly doubt any of them ended up on the streets or unable to feed their kids. In fact, I suspect many of them -- like my neighbors -- don't regret for one moment discovering the natural and community beauty of this area, because they got past the hype and fashion and realized there's plenty here to feed their dreams and their souls, stuff that money can't buy. Kinda makes any overblown prices worth it, actually ...

Those who were speculative and were simply looking to flip properties were obligated to know the risks they were taking. And hey, glad some local businesses profited in the process. They, better than anyone, know how to grab on to the boom-and-bust cycle, as Sullivan County's economy tends to operate on the "gold rush" system, however brief it may be.

[LG]

I have said this before and I will say it again.

My home in Queens is worth about double of what it was worth 20 years ago. Miraculously, in Sullivan County, prices quadrupled or worse during the "fleeting fad of the New Catskills". Now that buyers are all but gone, sellers are wondering why offers are so low? Maybe double the price of 20 years ago isn't so bad!

Sell now or forever hold your peace.

[Dr. J]

DN,

The stimulus from the Fed is maintaining status-quo. That's why we see holding (sellers don't need to sell and buyers don't need to buy).
In the real estate cycle, this is the worst time since volume is so low.
Obama will not and cannot stop the printing presses. It is expected that when the Fed overshoots, it will be inflationary and cause a rapid rise in consumer prices like in the late 1970's. That will provide more malaise and grief for us consumers weakening home sales even further. US debt obligations will eventually raise interest rates. This is when the dam breaks and there will be what appears like fire-sale prices. But by then, you might not want/afford what you are shopping/considering today.

This is called a "rising tide". Relatively speaking, even if home prices are much lower in a few years, what difference does it make when the price of essentials is sky high, interest rates are rising and salaries aren't moving?

[Mark]

ar...do you really believe what you write? I love how you paint buyers during the boom as clueless followers being misguided into throwing away millions. Most of the second home market here in S.C. are pretty savvy NYC residents who have worked hard in their respective business, and have enough money to buy a second home.
Millions incinerated in Sullivan County's fifteen minutes of real estate fame? Whats your deal? you can't really believe that crap. Do you have any real idea of the market here?

[Rod]

The market remains if you have something of value to sell and respect your customers' intelligence. I think most buyers are well aware of the hazards of real estate buying, in good times and bad.

[Nest Dweller]

I dunno, ar... I bought in Sullivan during the "boom" (2005, to be exact) and I don't regret it one iota. Not only did we end up with a fantastic little house on a beautiful lake, but it remains a great investment... I know I'm lucky to be saying this, but - even in the down market - I'd low-ball estimate that our place is worth about 10-20% more than what we paid for it.

It seems to me that you're making the assumption that anyone who bought real estate here during the so-called "15 minutes of fame" was suckered, that we were being dense and optimistic, and that we were all buying into the hype of the time. Speaking for myself, I knew exactly what the drawbacks of the area were (and are), as well as what was hype and what wasn't. I had many, many good reasons to buy here at the time... so I did.

Furthermore, the real estate figures for Sullivan - past and present - are similar to many (if not most) areas of the country. Yes, there was definitely some "move to the country" hype here a few years back, but the housing bubble happened everywhere. I'm frankly glad I put my money here and not in Las Vegas or Fort Myers, just to name a few examples.

What seems to underlie your post is that you feel that all the reasons to buy here were all fabricated and phony, and that - at its heart - Sullivan has little or nothing to offer. I politely disagree. Yes, we have plenty of negatives here... but that's true of anywhere you go. I happen to like it here a lot.

So, perhaps I fed the dream... perhaps I took the bait. In the end, I'm thrilled I did. It was a great choice for me and my loved ones.

[Ken]

Housing going from a median of $130K to around $180K over the course of a few years is hardly a gold rush or a housing boom. It's still basically pocket change to most professionals that work in or around NYC. But when credit markets are basically frozen even pocket change can be hard to come by. SC is still the best deal for the money within a few hours of the city. "We have no stores"????. I'm a weekender from NYC with a place in Narrowsburg and we have a grocery store, several restaurants, a pizza joint and some bars within walking distance. If you want acreage then you usually expect to have to drive to such things. I'm sure the NY Times articles helped get the word out. Bethel Woods is also helping in that regard. They've quickly become a carbon copy of the Saratoga Performing Arts Center but they're a lot closer to the city. I think the only thing that's gone for quite some time is the people looking for the renovated $450K farm house on 5 acres with a barn. The Wall St bonuses that helped fuel demand for those houses are gone for the time being but the median houses in SC are still very affordable for many city dwellers. It will just take a little more time for the credit markets to thaw out. Several friends of mine laugh when I tell them what I paid for a house in such a beautiful area. 3 of them have purchased homes now - the most recent was just a few months ago. They think it must look like the junked out factory towns that are so typical of upstate NY and when they come to visit it's quite an eye opener as it was for my wife and I.

[Julie]

Sullivan COunty is in DEPRESSION.

[Mary Ellen]

Yes, SC might be in a depression, but the trees and lakes and forests don't know it, and they are just as beautiful now as in 2005 or whenever. Buy a house for THAT return, the investment you can always count on.

[Julie]

My aunt bought a home on 5 acres in Narrowsburg in 1989 for 78,000. She tried selling it in the late 1990's and was told by her realtor it was worth at most 65,000. Being told you overpaid is hard to swallow. She later gave it to her daughter and in 2006, she sold it for just under 200k.

If that wasn't stupid money chasing smart money, what was it?

Marketing is steered by advertising costs. When the culture of the consumer is to spend, people spend stupidly. When the culture is to save (like now), marketing tactics shift based on the climate. Today, a NY Times article on a 300k+ home in SC is not going to fetch much advertising space. Writers need to write based on audience #'s. Advertisers pay for space based on those #'s.