Chapin Lakefront Home Sells For $550K

One eye catching sale recently. A 2BR, 2 1/2 bath, 2,400 sq. ft. lakefront house at the Chapin Estate sold for $550,000, the lowest price for a lakefront home sale I can recall at Chapin. The house, on the Swinging Bridge side next to the lake club, was listed at $799,000, and was on the market for 180 days. There was no information on circumstances surrounding the sale, e.g. if it was a short sale or not. But whatever the circumstances, it's a pretty dramatic sale price for Chapin.

Comments

[HS]

It was location that hurt the price on this one. While it is convienent to have the lake club right next door it did not allow for any privacy which is key for many of us that are trying to get away from the city. Also anytime Chapin has an event at the lake club you might as well be holding it yourself becuase you will have 40+ people 400 feet away without anything blocking the view between the deck and the lake club. That said this was still a great deal for the buyer & I am certain they will enjoy it.

[arey]

Why is this price drop dramatic? You've had posters here predicting this for some time. It's still overpriced, Mr. K.
The meltdown hasn't hit the upper end with a vengeance yet. It's coming.
What's the status of the dams that need to be repaired? Have you stopped your car and walked around any of them? Lake Joseph? Lake Superior's dam which will ruin Black Lake? The two wooden boards that hold back Swan Lake from turning into a pond?

[Bix]

In a weak market, price drops tend to affect most dramatically the most marginal properties. If this one has a major privacy issue, then I can see why that would be the case here.

[David Knudsen]

I think the buyers of this house got a pretty darn good deal. That price is what I'd consider a "hit the upper end with a vengeance" price. The sellers needed to sell, I guess, and that's what 'the market' was willing to pay for it. But it almost doesn't matter how low a particular property sells for, there are those on here who think that the market hasn't truly hit bottom until every house in Sullivan County sells for 99 cents or less.

[ANM]

It's clear that activity in the upper end is pretty abysmal. There is a big difference between those who are think the market will hit a bottom when "every house in Sullivan County sells for 99 cents or less" and the more reasoned belief that much of the upper end is overpriced by 20% or more. David, I wouldn't scoff too much. Your "pretty darn good deal" may well become the new norm.

[David Knudsen]

I would pretty much agree with you, ANM, that much of the upper end is overpriced by 20% or more. What I responding to was arey's comment regarding this particular house: "It's still overpriced." There is a group of posters on here that think everything is overpriced, no matter what it sells for. The house could have sold for $300,000, and someone would have commented that it's "Still overpriced." At what point will the bears actually concede that someone might have gotten a good deal? 99 cents?

[DN]

That's a good point, Dave. If the sale price (not listing price) doesn't fit their Armageddon views, then the buyer was foolish; the sale was an outlier; still overpriced. Mind you, it SOLD. It was a market clearing price that brought buyer and seller to an agreement. That doesn't mean that home prices won't fall still further, but it clearly was appropriately priced for this set of buyer and seller--or else it wouldn't have SOLD.

[lm]

Since you're a professional and I'm a real estate writer your blog is of interest to me. Fisher Island real estate peeled off 30% and your Chapin house did the same.
To answer your question as to the low: It's 60-70% from the top. I expect this house to roll back to $250,000 before it's over.
My oceanfront home has not been immune from this decline, FWIW.

Regards.

[ar]

Let's suppose lm is being too pessimistic but that the market goes still lower (even Dave K says that's possible) to 40% below 2008. That means if you paid $400K then, you've incinerated $160,000, and now you're servicing a mortgage that today might be enough to buy you a nicer house than the one you have, for cash. The question: do you have any reasonable prospect of recovering the loss? In the boom years, what was the annual percentage of price increases? Seems hard to believe anybody is going to make up that $160,000 in the medium term, maybe not the long term. I'm sure people today are getting very good deals. I'm just astounded by the amount of wealth destruction among the boom buyers. Dave, having no doubt brokered some of those very, very bad investments, do you have any qualms? It's a serious question and I hope it doesn't provoke an overheated defensive response from you or nuclear-level defensive posts from your many, many admirers. Really, having been in the thick of it in the boom, and seeing the numbers now, what are your thoughts?

[David Knudsen]

ar, the question, "Do I have any qualms?" isn't the right question. It implies that as an intermediary brokering transactions at those prices, I did something untoward that I should feel guilty about. It's not like the situation in the financial sector, where one part of an investment bank was pushing investors to shovel more money into mortage backed securities while another part of the same company was shorting those same securities. In 2006 to 2008, everybody, it seemed, was drinking the kool aid. Everybody, it seemed, wanted to buy real estate. Buyers outnumbered sellers and there was a shortage of inventory. The marching orders were "get me the house", and on more than one occasion my cautions that a house just wasn't worth it fell on deaf ears among buyers.

The "wealth destruction", as you like to call it, goes far beyond real estate. Wanna take a look at my 401k? I don't think, overall, that the 'wealth destruction' has been a whole lot more severe here in real estate, than if someone had purchased stocks at the peak of the market. And it's been nothing like the price devastation in the sunbelt states.

Market prices are what they are at any given point. I've been very upfront with my clients, as a buyer agent, in terms of sharing comps and helping them determine a value for a property. I think a lot of folks I've worked with would attest that I'm actually quite conservative, when it comes to real estate — encouraging them to focus on unique settings or features that would support value. On a number of occasions I dissuaded buyers from proceeding with houses that I felt were marginal at best.

Do I feel sad that people I know, if they're looking to sell a house purchased near or at the peak, may end up taking a loss? Yes. But that's different than having qualms about selling them the house in the first place. I know my response may make me sound like some callous Goldman Sachs exec testifying in front on Congress, like "Hey, those investors wanted to buy and we sold them what they wanted to buy." But in 2006/2008, buyers wanted to buy, and I think I did a good job in helping them do it. There is this "lambs led to the slaughter" attitude that wants to place blame. That finger pointing is well placed when it comes to the subprime mortgage market, and getting buyers without a pot to piss in to buy houses. But that's not the second home market.

This discussion also neatly sidesteps one key fact. That most second home buyers use and enjoy their homes. Of the 100+ houses I've sold since 2001, only 6 have come back on the market. 3 of those were because the buyers decided to upgrade to a better house here. 1 was because the owner moved out of New York. 1 was because of a breakup. And only 1 was because the buyer just didn't like it here. I think that's a pretty good track record in terms of matching people up with places they use and enjoy. (The land-only record is not as strong. About 50% of land buyers over the past 9 years who did not build a house put their land back on the market.)

You could make the argument that this may be skewed because some of those I helped buy houses may be "stuck" because they might take a loss if they sold, so they don't put their houses on the market. But I see clients I've sold houses to all the time here — in the grocery, at the farmer's market, at retaurants or just walking down the street. The overall response I get is that they love it here, and aren't looking to sell. Sure, I get the question "So, what's my house worth now?" But it's more of a curiosity. I don't pick up some widespread desire to sell, or a "sell if we could only get out" desperation.

[Nick]

Hey AR, I could write the same long post yet again... but you've heard it.

I've asked you 89 times. What's your position with regards to Sullivan Real Estate? Are you an owner, a long time resident, a renter, a summer renter, some guy that just likes to comment even though you have nothing to do with it?

You have a clear longstanding frame of reference that skew all opinions towards it. So it's a fair question -- what's your position in the market?

[rod]

Once again ar makes the assumption that real estate is a short term investment. The whole argument is bogus - if you bought real estate as a mature adult, one knows that the investment is not for 3 years. It's very possible 10, 15 or even 30 yrs. That's always been the measure of evaluating real estate as a wealth builder.

The concept that in 3 yrs you should be able to get your money out (after paying 7% commissions on both ends) is just immature. And if the measure of enjoying your real estate purchase is measured on a daily or monthly basis, again, probably results from a basic misunderstanding of money, investments, and liquidity. When you buy real estate, you are making a commitment. To think you can just change your mind is, like I said, immature.

[MadHedgeFundTrader]

"I expect this house to roll back to $250,000 before it's over."

+1

[MV]

Long term investment? Not in a million years.

My co-worker bought a small ranch in Smallwood in 1987 for 96K
She sold it in 2006 for 195K.
She was talking to her seller agent and was told the most she would get is 135k today.

It is all timing. Unless you get it for a bagain, it is always a loss when you figure in inflation and buying power.

It's a farce. Our whole financial system is a farce and economics 101 is just not learned in highschool. The government's intent to keep econimic and financial obfuscation is paramount.

[ar]

No, Nick, I've never claimed any a "clear longstanding frame of reference" -- that's why I ask questions. I have bought and sold half a dozen residences in various places including Sullivan County (I expect you can't say the same thing -- that your purchase at or near the top of the market in 2008 is your first and only) but I don't pretend that gives me any wisdom. I'm fascinated by the absolute train wreck we're watching in the SC second home market and by people's varying reactions to it. I don't think the stock market is any relevant analogy -- Dave, compare where your 401k was at its low in 2008 versus where it was in, say, March of this year; have home prices ever had that large a comeback in a comparably short time? And, no, Rod, I'm not talking about 3 years; but if you start $160,000 in the hole from your 2008 purchase price, how many years, reasonably, do you think it will take to get back to even? As for the "I really like my house" argument, come on. Liking the house is the baseline -- if you burned $160K in two years and don't even enjoy the house or the area, forget everything else. But it's silly to pretend that the economics are secondary when 90% of this blog is about the price of second homes in Sullivan County.

[Nick]

Did the last poster really say "Long term investment? Not in a million years" and then go on to describe price fluctuations over a 23 year period?

For reals? Y'all ain't even trying any more...

[Mary Ellen]

I have to agree with Rod.

Who buys a summer house for the purpose of making money 3 years down the road? It's not that kind of investment, in my opinion. And if the monetary value of the home decreases, most people would shrug and say it was worth it anyway for the enjoyment and memories it produces.

It's possible that people who came of age in the boom years of real estate (in the Northeast) came to believe that it was the norm to double your money in a few years.

But, to me, if you expect a financial bonus every time you purchase a house, it sounds like maybe you couldn't afford it to begin with.

If someone is land speculating, that's a different story.

[Uncle Vito]

"Once you buy upstate, you are buying forever"

[nick]

OK so ar you bought 6 houses... congrats... yes that makes you and me pretty similar in terms of experience... which is to say not much.

So you just continuously refuse to answer the question. What is your *current* position in SC real estate. Do you own, rent, or just talk from the sidelines? If you bought and sold property here did you make or lose money? Are you underwater now? Sell too late, or too soon?

I have posted my situation already. I have been coming to SC for 25 years. My family owns two houses here, I own one, bought after severe damage in 2008 and renovated. Close family friends have owned here since the 1880s.

That's me. You talk a lot but never really just answer... what's the issue?

[ar]

Hey, Nick, you pester me for some personal information, I reluctantly give you something, and your response is a snarky "congrats" even though I made clear that I don't claim any special experience or expertise. What's with you? Why the need to personalize everything? Based on your confessionals here and on Bix's blog, we already know that you popped for more than $300,000 for a wrecked non-waterfront house, at or near the market peak, and borrowed another $100,000 to renovate it. Congrats. You go ballistic over any post that suggests that may not have been a perfect financial decision. After all, you say in a particularly embarrassing retort, you've an got an undergraduate degree in economics! But neither my situation nor yours -- including your family friends with ties to SC dating back to the 19th century -- has squat to do with a rationale analysis of the real estate market. Mostly I ask questions: Given historical price patterns in the SC market, if there has been a 35%-45% drop from the 2008 peak, is there any reasonable basis to believe that someone who bought back then will recover the loss? Was the 2004-2008 boom a once-in-a-lifetime event for SC real estate? Why hasn't SC achieved demand parity with better known second home markets like the Hudson Valley? I'd love to hear rational answers to these questions if you have them, but please stick to the relevant facts.

[Nick]

So you don't answer the question. It's an important question, because you have a very strong point of view that's clearly colored by personal experience.

I've shared mine, I'm out there warts and all. I have family who in turn have friends with old ties to the area. That's factual, doesn't make me rich, or special, or them. Um, great. I paid "high end" money (for SC) for a place that needed extensive renovation, and did it. And I've been pretty open about my thinking on that decision. I hardly go ballistic at all. It's quite possible it was a stupid decision -- or more accurately will be in retrospect. But I am not judging it on the time scale of a year or two. I'll happily admit though that I might have done better if I'd waited another year or so. I am quite open to the theory that I made a mistake, I just say the polls haven't closed yet. I also admitted to losing a ton of money in my IRA. Real self-aggrandizer I am eh...

I will "go ballistic" if you mean "disagree strongly" when people make up numbers or facts or grossly misunderstand economics or basic financial concepts. As for my economics background it's a little heavier than it might appear at first glance but it ain't worth proving that on the internet either...

Just take it on faith perhaps.. ;-)

You have questions? OK:

> Given historical price patterns in the SC market, if there has been a 35%-45% drop from the 2008 peak,
> is there any reasonable basis to believe that someone who bought back then will recover the loss?

Yes, of course. Three obvious scenarios come to mind.

1. Steady appreciation due to demographics (just more people, period) in the NYC area and SC's proximity.
2. Accelerating inflation, which will benefit everyone who still owes the bank money at fixed rates.
3. Another real estate bubble (they do happen cyclically.. though I agree it'll probably be quite a while...)

> Was the 2004-2008 boom a once-in-a-lifetime event for SC real estate?

Hardly. It's happened plenty of times for decades, centuries maybe. Hell there was a serious boom followed by a disastrous bust just short of 200 years ago. First the roads to the area opened up, followed by the canal, sending values skyrocketing. Then the Erie canal opened and suddenly Albany all the way to the NY's western border had NYC access and the market collapsed. That's one. There must have been one between the 20's and 50's when it became a thriving resort area and all the retreats were built. I'm sure David or someone knows more than I. But of course there have been. Vacation area booms and busts are about as predictable as winter.

> Why hasn't SC achieved demand parity with better known second home markets like the Hudson Valley?

I have posted many theories about this, from amenities to blight to regular old obscurity. My pet theory though (non-scientific) is that it's the lack of train service from NYC. People in NYC often don't have cars and that's hell on weekend plans. And I think that's basically permanent... and as long as it is there will always be a bit of a discount for SC vs. towns along the Hudson line.

....you asked. You didn't answer a damm thing, but whatevs.