Some Predictions for 2012

It's that time of the year, to look back and look ahead. At the end of 2011, we can breathe at least a little sigh of relief. It will still be a few weeks until the final end of year sales numbers are in, but it looks like sales volume and prices will be just about even with 2010. On one hand, treading water on the volume front is a little disappointing, given that the northeast region as a whole is showing a modest uptick in sales volume for 2011. But we didn't fall off a cliff, either, which is somewhat remarkable given the pall of gas drilling that has been casting a shadow over the western Catskills for the past couple of years.

So what do I think 2012 will look like? A lot hinges, in my opinion, on whether the gas drilling issue gets definitively resolved. Will gas drilling come to Sullivan County and, if so, where? The New York Dept. of Environmental Conservation is expected to issue its drilling regulations in 2012, possibly in the third quarter, but could be as early as late spring. But the NY DEC isn't the only agency with regulatory authority for drilling in Sullivan County. The four state Delaware River Basin Commission (DRBC) is also expected to rule on whether drilling can occur in the Delaware River Basin, and if so, under what terms. The third factor is the geology. This past year, some geologists have weighed in about whether the gas underlying Sullivan is economically extractable.

I think it's a given that the NY DEC will green light hydrofrack drilling in some form in this state in 2012. A green light from the DRBC is much less certain. If the DRBC says 'no' to drilling in the Delaware Basin, or makes it so onerous or expensive to do so, that would lift the pall of drilling over this area and could uncork second home demand in the west/northwest areas of Sullivan.

A red light to drilling here will likely mean more large raw land parcels will come to market, which would mean more land available for small organic farmers. Demand for land for small organic farms has been high all year, but there's been almost none on the market here. Land prices further east in the Hudson Valley are often too high for small start up farmers. and cheaper land further north is too far from the key NYC market. Sullivan County is well positioned to take advantage of this locavore farming trend, if cheaper land is available and the possibility of gas drilling is minimized.

Until there's resolution of the drilling issue, I expect the demand profile for Sullivan County real estate in 2012 to be similar to 2011. Interest in lakefront and lake-related properties will continue to be strong, which will hopefully bring more inventory to market. The throttle on lake sales here all year has been a lack of good inventory. However, the buyer focus on value will likely keep price appreciation on lake properties modest at best. Sellers who are waiting until their lake house which could have sold for $350,000 this year will pull $450,000 won't likely see that happening in 2012.

I also expect demand to remain high for vacation getaways with privacy in the $200,000 to $250,000 range, which was a sweet spot for buyers in 2011, as well as inexpensive cottages in places like Smallwood in the low $100's. Communities that offer land protection, like Wolf Lake, Black Forest, Merriewold and Edgewood Lake, will also likely have increasing appeal.

In 2012, we could see some modest price appreciation. The keyword here is "modest", possibly in the 3-4% range. I don't have a crystal ball on this, but base it on the fact that a lot of the long standing inventory that had appealing features for the second home market moved this past year, with the owners essentially throwing in the towel on price. There is less appealing long standing inventory on the market, so less opportunities for fire sale deals — and that will likely raise the overall median and average sales price a bit. The wild card on this could be how 'deal focussed' buyers remain. But as 2011 progressed, I found that buyers continued to be value focussed, but not quite as obsessed on getting the deal of the century. Also adding to the upward push on the overall average will be some increased interest in larger, higher priced houses — something we started seeing in the second half of 2011.

On the development front, the Double Diamond Lost Lake community in Forestburgh (ultimately slated to have 2,600 homesites, an 18 hole golf course and resort hotel on 2,000+ acres) will likely get the green light for Phase I, which could throw a positive spotlight on Sullivan County. I'm skeptical, though, about whether we'll see a casino putting a shovel in the ground in 2012 here, given the ongoing disputes between the various casino interests and the possibilty in 2014 of a statewide referendum to permit non-Indian gaming.

2012 could be a reasonably good year here, particularly if there isn't any economic shock that rumbles through New York City and undermines confidence among middle income buyers, which is the bread and butter of our second home market.

Comments

[Arnold.]

Good report.

However, many of the same Catskill / Pocono propsective buyer's in their 40's to 60's are now looking for a second home in the warmer climes of Arizona, Florida and California whose prices are at vastly distressed numbers.

For example (from peak of 2006 to now)

Miami - Off 51%
Tampa - Off 47%
Phoenix - Off 56%
San Diego - Off 40%

The rationale is to rent (thereby not making the financial commitment of mortgage, taxes, insurance, oil, car, etc...) for a few Spring through Fall weeks in the Catskills via internet until the gas thing clears.

Arnold.

[Mary E]

If gas drilling does come to Sullivan county, people will see that it's not the big scary bugaboo that it's been portrayed to be in the media, and country life will go on as usual. Once the dust settles, I believe Sully will prosper as it hasn't in the last 50 years.
My home has doubled in value in the last 12 years-the same years that gas drilling has been near me. They are unrelated events, but drilling doesn't necessarily mean we all have to pack up and leave. It actually operates pretty unobtrusively (however, I have not seen Pennsylvania; here in Dallas, they keep the rigs off the beaten path)
Real estate prices in Sullivan seem to be rising slowly, and there is a great demand for country getaways, if my farm rentals are any indication.

Happy New Year to you David, and everyone on here. You keep me on the pulse of what's going on around Buck Brook Acres (my own personal version of Green Acres, minus Ava Gabor.)

[Chris]

Sullivan taxes rates are too high. Columbia and ulster are slightly lower.