Swinging Bridge Sales Tally: Zero

Swinging Bridge Reservoir, in the Mongaup Valley 6 miles west of Monticello, is our largest lake, and traditionally has been a top destination for lakefront second home buyers. But this year there hasn't been one lakefront home sale on Swinging Bridge to my knowledge. None. Zero. Zilch. The last sale was 17 months ago, in June 2008 --- a 3 bedroom, 2 bath, 2,000 square footer that sold for $495,000.

The Swinging Bridge sales drought is now longer than the nail biting stretch with no sales in 2006 when the lake was drained to repair the dam. Sure, since the last sale we've slid into an economic malestrom, but in a lot of property categories we've been inching our way back out since early summer. And there has been a definite pickup in lakefront buyer interest. I get two or three emails or phone calls every week about lakefront property, and quite a few of those potential buyers are looking for houses on motorboat lakes, like Swinging Bridge.

We have inventory. This year there have been between 8 and 12 lakefront houses on the non-Chapin eastern side of the lake on the market at any given time, ranging from a 2 bedroom renovated ranch listed at $329,000 to a substantial home with a pool on 5 or so acres at $1.575M.

And we have water. Swinging Bridge levels were comfortably high this summer, with a modest draw down to repair a spillway, but well within recreational levels. So the sales slowdown can't be attributed to the water.

But there are two factors colliding on that lake — demographics and price — that have resulted in the poor sales showing. On the demographic side, the second home buyers I've been seeing since spring have almost all been in their 30's, with only a smattering in their 40's and 50's. There is a noticeable age downshift that's very explainable. 30-somethings with good stable jobs have been more insulated from the downturn. They have less invested in 401K's and are further from retirement, so haven't freaked out about a shrinking retirement nest egg. They see an opportunity window in this recession, with low mortgage rates and lower prices.

Among that demographic looking for lakefront, they tilt towards non-motorboat lakes. They're looking for a quieter, more pristine lake experience. I've done 5 lakefront deals this year (2 are closed, 3 are in various stages of closing). All 5 buyers had a preference for a non-motorboat lake. Motorboat lake fans tend to skew a bit older, and I'm sensing that as buyers move past 40, they're much more financially conservative, if they're looking at all.

That's where price enters the picture. The buyers who are shopping for motorboat lake (and I go out with one or two every month) aren't seeing the values there. The price range expectations I'm hearing from these shoppers are pretty consistent. Buyers looking for something "family sized" with 3 or 4 bedrooms on a motorboat lake want to spend between $350,000 and $400,000 tops. The less common 2 bedroom buyer is now looking to spend in the mid $200's, maybe up to $275K.

We don't have any motorboat lakefront houses that actually hit those price points. The least expensive 2 bedroom is listed at $329,000 (and has been on the market for over 2 years, originally listed at $399,000.) The least expensive 3+ bedroom is listed at $449,000 and another just above it at $475,000. The lion's share of 3+ bedroom motorboat lakefront houses are listed well above $500,000.

I get periodic calls from listing agents on many of these properties encouraging me to show them, and indicating that the sellers are motivated and to bring an offer. True, there have been modest price reductions on some of the houses, from, say, $749,000 to $699,000 or from $349,000 to $329,000. But nothing that screams serious motivation, move this house. None of the houses I've shown on Swinging Bridge in the past few months has generated a response from a buyer of "Wow, what a great deal." The more common response is a polite ho-hum.

The reality is that we're in a market where generally the only houses that are selling are those that are perceived as super deals. (I've blogged about this a number of times over the past few months.) Not just good deals, or OK values, but super deals. Until some of the houses on Swinging Bridge move into that range, the sales tally there will likely remain at zero for the foreseeable future.

Comments

[rt]

Super deal? In what context? A super deal is defined in comparison to something else. If you heard of bicycles selling two years ago for $500 and you now were able to buy the same one for $300, does that constitute a super deal OR what should have been the correct price for them two years ago?

It always comes back, David, to financing and taxes. The former has disappeared for $400K+ and the latter has been enhanced :).

[Henry]

Given my bearish views on lakefront property in recent years (for which I have been skewered repeatedly on this board), I think that it would surprise many that I am in the process of buying a lakefront place on a motorboat lake in Sullivan county. For many reasons, it is the right place for me. Further, while down significantly from where the property would have traded in recent years, I know that I am overpaying. Still, as the purchase price is less than half of what I thought I would spend a few years ago, the amount of overpayment in absolute dollars is acceptable. Lastly, I got a ridiculous deal on a long-term lease to upgrade my primary residence... basically only covering the owner's maintenance payments with little to cover his capital costs. I am willing to trade some of that gain to stop my summer home search.

Overall, I still expect prices to continue to fall, and see great risk in the US economy. Still, for me, it was time to take the plunge... in a modest and risk-adverse way.

Lastly, it is somewhat surprising to me that the summer place that I hope to buy is in sullivan county (as much as I love the area). In general, I have seen much better pricing (and larger reductions) in other areas and been involved in several broken deals elsewhere. It is strange how things work out sometimes.

[My housing is my hosing]

Real interesting housing graphic from Case - Shiller:

http://www.ritholtz.com/blog/wp-content/uploads/2009/06/case-shiller-updated.png

...myron in callicoon

[David Knudsen]

Thanks for that chart link. I agree, it is very interesting. I'm a big believer in historical data and ratios, like the ratio of the cost of renting versus owning over time. This one is pretty compelling. That metric seems to indicate we have about another 20% or so downside on prices. So those buyers who say they want to spend $350,000 to $400,000 on a 3BR lakefront house may not be that wrong.