Last March I was prompted by a buyer client to analyze the relationship between asking prices and selling prices in two of the communities I cover, Briarcliff Manor and Croton-on-Hudson. A savvy Wall Streeter who followed market trends, this buyer was looking at houses in both places, and he told me flatly that he’d be a fool to pay any more than 75% of the asking price.

Sure enough, he liked a house I showed him and made an offer that took about a third, or almost 35%, off the asking price. When I told him he could not expect the seller to counter such a low-ball bid, he replied that given how the market was trending in Croton, especially for million-dollar-plus houses like this one, and given the history of this house which, although the price had come down from its original asking price, had been on the market for months at the same price, the seller should be happy with his offer.

The seller did not counter his offer.

When a realtor gets greeted with the question “How’s business?” it’s not the same as being asked “How are you?” People really want to know the answer. It’s not surprising. In a Westchester community like ours, most of us have some skin, one way or another, in the real estate game.

For this reason – and because big money is involved, and because it affects not just our personal fortune but those of our friends and neighbors – real estate is fertile ground for gossip and rumors.

Lately there has been buzz about a purported mini-surge in activity, that deals have picked up. People ask, “Is it true? Does it mean we may be coming to the end of this slumping market?”

Let’s start with what we know. Late in July, the Westchester-Putnam Multiple Listing Service (WPMLS) released its report* on residential sales for the second quarter of 2009, and it brought good news and bad. The good news was that home sales had picked up from the previous quarter. The bad news (unless you’re a buyer) was that prices continued to fall.

The rise in sales activity was substantial. Single family home sales, adjusted seasonally, showed a 19% increase over the first quarter, “the first significant break in the unrelenting decline in sales rates since the first quarter of 2007,” according to the WPMLS report.

On the pricing side, the median sale price of a single-family home in Westchester fell by 16.3% compared to 2nd-quarter sales in 2008. In the first quarter of 2009, the decline from 2008 had been 14.5%.

Unfortunately, I can not break down these county-wide figures by individual communities and get meaningful results because the volume of sales is not high enough. Croton-on-Hudson and Briarcliff Manor, for instance, each had only four sales in the first quarter of this year, too small a sample to derive valid statistics.

The problem with the numbers in the MLS report, revealing as they may be, is that they’re old. They mostly reflect sales activity from last winter. So a house that was listed in January, went into contract in February and closed in April would be counted in 2nd quarter statistics (and most home sellers today can only dream of a transaction that speedy). Similarly, a house that goes into contract in August and doesn’t close by September 30 will be reflected in 4th quarter figures, the report for which we can look forward to seeing next January!

So what’s happening right now? Real estate insiders see a softening in the hard-line positions on pricing both buyers and sellers took up earlier this year, resulting in many standoffs and few deals. Christopher Meyers, chief operating officer of Houlihan Lawrence, said recently, “I think we are now in an environment where the buyers and sellers are coming to some consensus on where values should be.” In other words, prices are coming down enough to begin to be persuasive to buyers. How far down? According to Mr. Meyers, “they are down typically by about 20% from where they were at the height of the market and at those levels they are trading again.”

Does this mean we have hit bottom? The bottom of the market, like the peak, is usually visible only through a rear-view mirror. Few thoughtful observers see the start of a turnaround in the near future. The realistic optimists hope that prices are at least stabilizing. Others, like Multiple Listing president Mark Boyland, expect prices to continue to fall this year. Bottom line: the encouraging signs of late give reason to hope but not enough reason to predict a recovery any time soon.

*Contact me at Bruce@BruceDollar.com if you would like a copy of this report. I also welcome any feedback or questions.

Posted By: Bruce Dollar