“Understand, we’ve never begrudged success in America; we aspire to it. We admire folks who start new businesses, create jobs and invent the products that enrich our lives, and we expect them to be rewarded handsomely for it. In fact, we’ve often accepted more income inequality than other nations for one big reason because we were convinced that America is a place that even if you are born with nothing, with a little hard work, you can improve your own situation over time and build something better to leave your kids.”
— Barack Obama, Dec. 4, 2013
“This country does a great job in creating wealth, but not a great [job] in distributing it.”
— Lloyd Blankfein, CEO, Goldman Sachs, Dec. 4, 2013
Mirroring in a modest way the present trend in Manhattan of the sale of apartments and condos at unprecedented high multiples of tens of millions of dollars, the increase in the number of sales of higher-end properties in Ulster County is providing the lion’s share of the present upturn in local real estate. The increase in the gross sales of a limited number of high-end properties has represented more than half the increase in the past year in the gross revenues from the sale of MLS-listed residential properties. The county’s present real-estate market is in alignment with the times.
Since real estate is an industry that varies widely both from local market to local market and from real-estate sector to sector, it’s not surprising that the local statistical picture in Ulster County is different from that in the state as a whole. The median price in Ulster County, like the median price in other mid-Hudson counties for which data is readily available, still has a way to go to reach its 2008 peak. While both closed and pending sales are increasing slowly in number and price level, the top end of the market has been markedly more robust. People of lesser means may still be recovering from the long-lasting economic downturn, but the wealthy — mostly from outside — are now spending. And one of the asset classes in which they are investing is country property in places like Ulster County.
The statewide residential housing market is seeing some recovery. According to New York State’s Board of Realtors, pending home sales statewide are up by double digits for the second year in a row (12.3 per cent from 2011 to 2012 and 14.0 per cent October through October of this year). Closed sales were up by similar numbers. The state inventory of homes for sale is continuing to decrease, another positive sign for the industry. The number of days properties are on the market prior to sale, another widely used but not always reliable metric, seems finally to be decreasing.
Meanwhile, statewide prices appear to have made progress toward recovery. Average and median sales price, both of which still have not recovered from the very sharp contraction in 2008-2009, have registered solid six per cent increases from October 2012 to this past October. Median house prices in the state have recovered almost to their 2008 level. Statewide, sellers have been getting an average 95.1 per cent of their last asking price, according to the state brokers’ group, the highest percentage since 2007.
Million-dollar homes
According to those in real estate, most of whom work for sellers, the time to buy is almost always: right now! Sometimes their arguments are more compelling than at other times. Is this one of the happy times? The signals are contradictory and murky. We won’t know the full picture until we can look at it in hindsight. Then we can safely say that we knew it all along.
Let’s look at the local numbers, which show median residential sales prices increasing 7.5 per cent from Jan. 1 to Dec. 5, 2012 to the same period this year. In the past year, the average sales price in Ulster County was up 18.7 per cent, and the total gross sales up 27.2 per cent (good for the industry, which is paid on commission). Total number of houses sold went up 14 per cent from year to year.
Let’s put these changes in terms of dollars. The overall trend seems upward. The sale price of the median residential property this year was $205,000, up from last year’s $190,700. The price of the average residential property in the MLS listings has risen to this year’s $248,800 from last year’s $222,400. Gross sales of Ulster County MLS-listed residential properties that changed hands from January 1 to December 5 of this year were $278.9 million, a huge jump from the $219.3 million figure for gross sales for the same period last year. Finally, there were 1121 properties sold under MLS auspices in that period this year compared to 986 last year.
What’s going on?
Sales of Ulster County high-priced homes have increased dramatically in the past year. Such sales seem mostly to stem from an increase in the willingness of predominantly high-income people from the New York metropolitan area to buy second homes, often for cash. Though limited in number, these sales account for a disproportionately large piece of the local real-estate pie.
Let’s compare sales of high-end Ulster County MLS-listed residential properties from Jan. 1 to Dec. 5 of this year with those of the same period last year.
This year 75 half-million-dollar residential properties in Ulster County changed hands at a median price of $629,000. Last year 40 changed hands at a median price of $585,000. Gross revenues from this year’s half-million-dollar-plus properties were $59 million. The gross last year from such properties was $28 million.
This year 24 three-quarter-million properties have changed hands at a median price of $1.05 million, as compared to twelve last year at a median price of $957,000.
This year twelve million-dollar residential properties have changed hands at a median price of $1.332 million, as compared to five last year at a median price of $1.182 million.
There’s a pattern here
This isn’t the first time that outside wealth and power has embarked on a property-buying spree. The buying of real property in Ulster County dates back to the wampum belts of shale beads given in consideration in the seventeenth century for the rich alluvial lands of the Native Americans. Huge land patents are a part of Hudson Valley history. Railroads and extractive industries bought and exploited large tracts, leaving the land despoiled and polluted. The time almost a century ago when New York City sent out the checks for land it had acquired by eminent domain is still commemorated by backwoods locals as “the day they shook the money tree.” Land barons both historical and present-day have made fortunes timing the market for real estate, buying in a bust and selling in a boom.
Among the cash-rich New York well-to-do, this appears to be an auspicious time for the selective purchase of real estate both for use and for investment purposes. Most is being bought at the very top of the overheated big-city market. “While there is a reasonable amount of new development at the high end of the market, inventories across the rest of the market remain lean,” commented the Federal Reserve Bank’s Beige Book about New York City real estate on Dec. 4.
Beaten down by the tortuously long recession and cash-poor, sellers on the exurban edges of large metropolitan area are deemed in a reasonable mood. The city well-to-do are finding the prices of high-end second homes attractive. All is well in the world of real estate. The game of economic inequality has reached new heights.
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