Real estate has (maybe) never been hotter

Remind me when the residential real estate market in Santa Fe NM has ever been as “hot” as it is today. Maybe my memory is failing, but we have never seen absorption rates this low (number of months to sell existing inventory) and I know of no other measure that is as accurate in describing the status of our market.

What this means is we are deep into a seller’s market, with buyers having little or no leverage when attempting to negotiate purchase price and terms with a seller. And when the market is one sided in status, it becomes predictable and numerous generalities can be applied.

As the history of this blog illustrates, the number of homes in the higher price ranges has gone up over the years while the number of homes in the lower price ranges have gone down. There is precious little inventory of homes available under $300K and one could say (without irony) that there is nothing to purchase for less than half a million…

These are tough times for someone wanting to own a home in the City Different unless they are well established with equity from another home they are selling or have a gob of cash (or borrowing power) available.

The other day, on a flight into ABQ, a person in my airplane row spoke of arriving to take a job in the hospitality industry, but had never been to New Mexico before and did not know where she would set up residence after a week plus of gratis lodging provided by her new employer. She did not know the average sales price of a home in our market is in excess of $525,000 or that residential rentals are rare and relatively expensive.

How do we lure the best and brightest adults to Santa Fe when what we really have to offer is housing for the wealthy and retired? Is our town going to become a cult location only suitable for those who can spend more on housing than 95% of everyone else? Will we still be a major art market and support starving artists here if they cannot afford to live in Santa Fe? Who will wash the dishes at our favorite restaurant and where will they live? And how will they get to work? Who is going to keep buying the homes that are for sale other than transplants and newcomers who are not put off by the prices they see here?

Daily one might meet someone wanting to put a freeze on growth in Santa Fe (build a wall around it I suppose) now that they are inside. Others welcome the diversity and cultural benefits to an open city that does not keep people out (although many still cannot afford it). I was a newcomer once (March 1983) and rarely felt like I wanted to live elsewhere. And yes, some would say I should never have arrived in the first place. For example, a brother of one of my closest friends believes it is people like me that have ruined Santa Fe. Turned it into a big ugly town instead of a small friendly town. Now choose to live 45 minutes South, in Placitas (which reminds me of much of rural Santa Fe) and feel perfectly at home.

In the last 15 years we have experienced a complete crash followed by a total rebuild of our market. Prices plummeted to well below replacement cost and then climbed back to where they are now; above anything we have seen before. That is just how its looking to me. You may have a different view.

Please imagine someone else tending to this blog by early next year as I focus on retirement and the enjoyment of middle age. It has been fun, a lot of work, caused some heartache and damaged some professional relationships. But it has been worth it and I am personally glad to have shared some of what I know to help you in your real estate activities.

Happy safe holidays!

Alan Ball

alanball2@gmail.com

Socialism and home ownership

That word in the title is thrown around quite a bit in political talk these days, more by those that use it derisively than those that prefer it. It seems mostly in use as a scare tactic, as in the GOP talking point that if you vote for a Democrat, you are choosing Socialism. But saying that does not make it true. And Socialism is defined in many ways just as, for example, being Christian can be defined. As Margaret Atwood said in a recent interview about her new book “The Testaments”, are we talking about a Christianity where the Pope is the ultimate authority or are we dancing with snakes and collecting moon rocks?

Do you personally think Socialism is good or bad? And how do you define it? You may say that Socialism means nobody can own real property in their name and you would be against that concept. Or you may say anyone with the means could own real property as long as they participated in the governmental systems established by leaders past and present such as property taxes, school districts and mandatory hook up to municipal sewer systems for household waste.

This dialog has been going on forever. Some recent writing about it can be found at a page on Quora thru this link: https://www.quora.com/Does-democratic-socialism-allow-private-ownership

or if you are thinking a deeper dive is in order, I am certain you will find endless resources and articles about this very subject. Again. definitions are important, i.e. democratic socialism may be quite different than another style of socialism you have heard tossed around. Will the state (or whatever authority in charge) take away my ownership of my home? Can I expect to own personal property too? I like cars. I own eleven cars and trucks. Will I be able to keep those?

Maybe the time you spend reading about Socialism will help in your understanding of the term and how it is being used these days.

What is going on in Santa Fe New Mexico residential real estate? (did you like that segue?) It is still hot as we could handle right now. The market is seeing most product get scooped up in short order as it becomes publicly available. And you can bet that those homes that make it into the MLS systems and are listed for the public (and their licensed brokers) to find online have already been picked over by others trying to find the best deals. If you see a home for $350,000 that has been on the market for 90 days, it has already been looked at and passed on by many people. That doesn’t mean you should pass on it too. It might be just right for you. The game of finding the new listings and submitting an offer in the first day or two is a difficult game to win.

If you were to focus on some of the spreadsheets and charts available to you on this blog/site, you will see an ever-increasing trend toward more expensive homes and fewer less expensive homes. The million plus price range keeps growing in supply as it continually grows in absorption of that supply. The lowest price range shrinks in supply as there are no homes for $1 dollar or even $100,000 dollars. Under $500,000 really means between $200,000 and $500,000 these days. And not enough new homes are being built to satisfy the demand for homes in that low range. Some Santa Fe residents would prefer NO new homes being built because they want to freeze the town just as it is, while others recognize their own children and grandchildren need to live in decent housing, just far enough away but still in the same county.

The long term outlook of Santa Fe real estate may be heavily influenced by water availability, but for now it is still being discovered by people of means and it is still landing on short lists of where some people want to retire to. Hopefully many of those newcomers will take an active part in its future and become involved in preserving its past. Who among you wants the town to be available for absolutely anyone to move to, and who wants it to be restricted and limited in its growth? Pricing and moratoriums on water hook ups are ways to limit growth.

Thankfully the hot summer is almost past and we can pray for an above average snow pack in the mountains this winter. That is the key to stalling the drought that is making water in the West so scarce.

Pushing uphill

We cannot just roll along but must push uphill in order to get into a home or to help a purchaser buy. The lack of inventory is scary and sales would see even higher numbers if more product were available to buy. New highs were set again last month: most sales above $1 million in any 12 month time frame, most sales between $500K and $1 million in any 12 month time frame, fastest average absorption rate for under $500K in our 15 plus years of tracking, etc.

The spreadsheets and charts here tell the story. We have a red hot market here and that is saying something after more than 10 years of recovery from the cliff we all sailed over in 2007 and 2008. Some markets recovered more quickly, mostly those with strong employment trends or legal marijuana such as areas of Colorado. Santa Fe does not have either of those factors (I cannot include service industry jobs at below living wage pay rates), but we do have Meow Wolf. It has been responsible for more economic growth than any single other thing that has taken place in the last 10 years. What can compare? The expansion of St. Vincent Hospital? New casino buildings?

The fact that Santa Fe was always a major art center helped a new venture like Meow Wolf succeed, we suppose. but maybe it was unique and original enough that it would have taken off no matter where it was located. But not Los Alamos or Las Vegas NM. And not Taos or Raton. Look at the value of Meow Wolf stock since it was first issued. Nothing like that exists in Santa Fe New Mexico.

Should we lament the crazy hot market conditions? Maybe yes if you are looking to buy as your options are severely limited. Sellers should be happy. If they are not happy they might have the wrong Realtor because if anything is true to day in the residential real estate market in Santa Fe, there is certainly a buyer for every house listed for sale. Personally a more balanced market can favor more people overall, providing a level ground for all to stand on. But markets are constantly changing. There is no perfect real estate market as it turns out.

Thank you for following along with my reporting about the City Different. We may lack some road crews fixing our potholes and repainting stripes, but we have plenty of people wanting to live here. We may lack transparency in government and social services, but if you can afford it, you can get almost anything you want here. We might not have enough opportunity for our young people to stay here after leaving school, but we have plenty of old folks that need medical attention and help with their computers. Can’t find a job? There are jobs; food service, retail, personal assistance to those in need. Sad though they might not be what you want.

The vibrant market gets hotter

Which month you choose to buy a home might make a sliver of difference in terms of what is available and how many other potential buyers you are competing with. But overall it does not seem to matter very much. Homes sell quickly 12 months a year in Santa Fe and there is no reason to wait when you are ready to make that purchase. It is not as if there will be some extra inventory next winter and sellers will be so motivated they will slash prices to sell.

Someone you can identify as a seller today will have already sold that home by next winter. You would have to try really hard not to sell a home you have listed; something like no bathrooms or extensive black mold or dream up something else that would turn off every possible buyer. Just because it needs to be remodeled does not mean it will not sell. Look at home sales over the last couple years and those that needed an updated kitchen or bathrooms sold anyway, albeit for a bit less that those that had been updated.

The lower the price range you are looking in the more you must be ready to move quickly in order to secure a home you want to buy. There are so many other buyers out there looking for the same thing that hesitating will not serve you well. Once you get into the mid ranges of prices in residential real estate in the Santa Fe area, the lack of inventory is still an issue, though not quite as severe. But a good quality home that presents well, anywhere from $400K to $750K will likely be sold in a matter of two months or less. My number for that phenomena is the Absorption Rate as published in the market stats available to you on this blog. Take a look when you get the urge and factor that into your plans to buy or sell a home in the near future.

Next year could be different but I doubt much can change in 12 months or so. Any large build out of new homes is already on the radar and those homes are already being built; mostly they are north and south of I-25 off of Richards or in the scattered developments off NM 599 and Airport Road. And those only partially satisfy the demand for housing.

Thank you for stopping by to update your informational needs about Santa Fe real estate. I wish all of you a prosperous and peaceful summer season in the City Different.

New stats posted thru April 2019

Read and copy or print if you like; newly calculated statistics are now available on the site for Santa Fe residential real estate sales thru the end of April 2019. Sales continue to be strong and there is a small increase in inventory which should be absorbed fairly quickly. Even the $1 million plus price range is seeing homes sell, on average, in less than one year. This is uncharted territory. Lets check back later in the year to see how things are going in that and all price ranges.

Thank you

The lies keep on coming

Just when you thought our Dear Leader might run out of ways to misrepresent the facts of any given topic, he comes up with new and unique ways to tell lies. And some of them just seem to be told so he can stay consistent in his lying. But when you hear some of them, you have to wonder what his motivation is for lying when telling the truth would be easier and would appeal to more people. After all , he adores attention and wants the largest audience and Twitter followers of all time (even though half of his might be bots and fake accounts).

It’s a bit like someone I know said of another famous liar: She would rather walk up 12 fights of stairs to tell a lie from the rooftop than tell the truth in front of you on the sidewalk. It seems even worse than the disorder known as being a pathological liar. Maybe there are degrees or levels of dishonesty. Little white lies might be lazy; someone did not take the time to research or ask questions – so they spout some lies to act as if they know what they are saying. Bigger lies can actually cause harm or injury (or death) which is many times more serious and destructive than those little white lies. Are lies important? Does it matter if one person with a high profile and undue influence over millions of people tells lies? Is that worse than you or I telling lies (for whatever sick reason) with frequency.

Since there are plenty of sources to feast on the huge bounty of lies told by our President, I will not repeat or attempt to recount them here. But if you do not accept that he is continually lying and do not believe his critics who claim he is dishonest, what is your problem? Do you lack a critical part of your hearing mechanism? Are you blinded by his orange skin and hair? Were you so afraid of women and/or blacks with some semblance of power that you were willing to vote for a corrupt, racist, abusive child of a man?

Once you were asked if you would choose to have health insurance or a white male in the White House and you chose no health insurance so you could have your while male. When that black President, Barak Hussien Obama, produced a flawed but effective health care system that added many millions into coverage that had none before, you called him a Muslim and wanted to wash that stain from our history and heritage. You support the wholesale removal of health and safety restrictions on polluting industries and are OK with unlimited drilling for oil and gas near the sacred site of Chaco Cultural Center or above the Arctic Circle. You might believe your Dear Leader is above the law and should not have to answer to the other two branches of government, even though there is confirmed evidence that he accepted help in getting elected and is probably literally an illegitimate President.

You seem to buy the BS that he is the best negotiator and a very successful businessman although his list of failed businesses is longer than can fit on a single page. You wanted Trump Casinos, Trump Airlines, Trump University degrees and Trump Steaks to hold onto. Where are they now?

My amateur writing skills do not do justice to the faults and shortcomings of that man. He is so vile and crooked that he cannot distinguish between right and wrong. He cannot see beyond himself such that any question becomes framed as how does this or that affect him? No matter that he is in a position of power and could help millions of people out of poverty, malnutrition, failing educational systems and a drug crisis that is killing thousands. What has he done about regulating gun sales? You must have a license to cut hair, drive a car or sell a house. But you do not need any such thing to own a gun in America. That is something he could fix tomorrow. Does he even know how little he would have to do in order to become a good guy to millions of Americans? They would forgive him his shortcomings if he would just fix one thing they want him to fix. Democrats would even vote for honest and helpful Executive Branch policy efforts that were humane and good for the common man. But that would not support his need to have enemies and keep tilting at windmills.

You did not come to this Santa Fe residential real estate blog to read my rantings about Trump did you? No apology. You can stop any time you want to. Nobody is going to tell you what to do or think here. My usual recommendation is to gather all the facts and allow the facts to help you arrive at a direction or a decision. Those facts allow you to feel strong in your convictions and stand tall against the winds of bullshit blowing around.

Same song, different verse

Take a quick look at the most recently updated statistics on this blog site and tell me, honestly, if you think sales units would be down if there was a selection of homes for buyers looking under $500,000. Go ahead, I’ll wait.

It is not pleasant to report that sales are down, but they are. They are down because there are precious few homes for sale for qualified buyers under that half million price point. That happens to be the price range threshold I use to set up my reports: Under 500K, then 500K to 1.0 million etc… If one wanted to search more narrowly, say between 300K and 400K, the numbers could be striking and actually sad.

There are plenty of market forces at work in Santa Fe residential real estate, including the dimensional shift into higher priced homes. Take for example the First Quarter Sales report attached and available for you to view by clicking in the margin. In the 15 years of reporting, home sales above $1 million have risen from single digits for the quarter, to five and six times that lately. This shows the effect of appreciation and the ever-increasing average and median home sales prices. Another way to view the shift is comparing the average sales price for a home in Santa Fe city and county for the two years 2001 and 2018… $295,674 then and $493,715 for 2018.

This is graphic evidence that the increasing average prices continue to hurt the first time home buyer and lay waste to reasonable market conditions in that lowest price range of under $500K.

How about comparing the # of months of inventory, on average, that our market offers to potential buyers, say as recently as 2009 compared to 2019. Then it was in excess of 13 months to sell a home; now it is barely over 2 months. do you think we could sell another 100 homes a year in that lower price range? How about another 250 homes? I suspect yes we could as there seems to be demand sufficient to accomplish that increase.

All is not lost for home buyers in Santa Fe. Their choices are limited and some say the quality inventory is gone in a flash, so one must be ready to move quickly with a solid written offer and be prepared to compete with other buyers.

I remember a time when a buyer customer I was showing homes to was upset because a new listing popped up overnight and I did not know about it to arrange for her to see it. Never mind that the market was much more saturated then and it would likely have been on the market for several months. It was not even a finished home so a large portion of the buyers eligible or interested would not have been able to secure a mortgage on an unfinished home. This buyer could due to the family trust having the ability to set him/her up with mortgage debt he/she automatically qualified for due to last name, DNA and being in good standing with the estate attorney in charge. Lucky me I was able to help with the sale. Lucky buyer that the home could be shown the first day it was on the market. We were the first to see it and of course the first to submit an offer.

Your favorite blogger will return soon with more analysis of what is going on in Santa Fe real estate. Stay woke!

How can it be so thin?

Just how can the capital city of New Mexico, with somewhere above 75,000 residents plus a bunch of part timers, be so short of inventory in homes available for sale? What do buyers do when they want to buy a home in Santa Fe? First, they watch to learn how the market is behaving. They pay attention to listings, studying how long they stay available before they are grabbed up by a motivated and qualified buyer. All of the widely used web sites that show residential listings – Realtor.com – Zillow – Trulia – and many more – show accurate listing data and when those homes go under contract, they often drop off the web site. That is your clue that home is no longer for sale (provided the contract holds up and it goes to closing).

So its fairly easy to track homes for sale if you are not ready and able to drive around town all day checking on for sale signs. What do you learn when you are shopping for a home below $500,000? (that is the low range in my posted and updated charts and spreadsheets available on the left margin). You see that there are many more homes sold in a year than there are available at any moment. This means that the absorption rate for homes under $500,000 is well below 12 months, on average. By the way, 6 months is considered a “balanced” market, between sellers and buyers. The calculation at the beginning of March was a mere 268 homes listed in Santa Fe city and county, while the current rate of sales is about 131 homes sold per month. That means in barely over two months, the entire existing inventory of homes will be sold.

It does not pay to be picky if you are a buyer ready to buy in this price range. Be prepared to act quickly and have a Realtor on call that can have your offer submitted in an hour or two.

Another point we might see more of is that listing brokers with Seller support may price a home knowing it will generate multiple offers and the status might change to pending on the listing in the first few days. Maybe the days of pricing a home a little above what it is likely to sell for are gone. Maybe better in this market to put a price on a home that is a “best guess” of what it will sell for and let the buyer’s brokers fight over whose customer is the most motivated to buy that home.

An issue with that approach is that Sellers must have put priority status on any repairs and cosmetic improvements. The new pending price has a better chance of surviving through the escrow period, when Buyers are trying to whittle down the price due to inspection issues. Sellers are well advised to get a pre-listing inspection and actually deal with the problems that report might identify.

And so, with thin inventory at critical low levels in the lowest price ranges, Santa Fe, the city different, extends its reputation as being unaffordable for most people. Money to put down? Good credit? You also need luck and excellent timing to buy a home in Santa Fe. Residential real estate deals are for the willing and the able.

Definition of emergency

Use the word invasion and you might make it stick. According to someone who might have been elected with illegal methods, means and influence, there is an emergency on our southern border because HE wants there to be an emergency and is trying to create one there.

Yet Border security employees, US Senators and many residents who live quite near the border say there is not an emergency that a wall, or steel structure, or human barrier would resolve. The true emergency is that our “Dear Leader” (the greatest deal maker of all time) is doing his utmost to uphold his deeply held beliefs that anyone that might be brown should be kept out of our country and he wants to preserve it for whites and only whites. Brown (and black and other colors) scare whitey. How about Muslim, Islam, Hindu and Buddhist religions? They are scary too.

Having to help those in need is not in his DNA. The would=be immigrants coming to our southern border are, for the most part, in great danger and suffering from physical, economic and cultural persecution in their home country. Getting into the Greatest Nation on Earth at least gives them a small chance to live a safe and healthy life. And that Leader wants to close our borders and deny them access, even though our laws state that people can apply for asylum and be allowed to enter and take their chances that they may be allowed to stay. If you don’t agree with him, he leads cheers to say that you want Open Borders. Did I mention that lies are his currency?

There is a small problem with that Leader in that he needs to maximize confusion and distraction from the pressure he is feeling from his corrupt and illegal administration’s mistakes. This emergency makes lots of people forget that he is possibly going to be impeached or go to jail or be forced to resign (he will claim victory and say he was too good for us) for all those deplorable things he has been getting away with. Follow the money and then count how many people from his staff and his orbit are either already guilty (they have admitted as much) or under serious scrutiny for what they have been doing for years. Some have even committed Treason. Manafort, Flynn, Gates, some very close to the Leader would be shot in another era.

We are somewhat reassured that the courts will be brought in to help decide if he can declare this emergency for the narrow reason that he could not get what he wanted from the legislative branch of our government. But what a waste of time and money having to protect the rule of law and our constitution because HE wants something and was unable to get it on HIS terms and timeline. Throw a tantrum, it may help.

What is your version?

2018 in review = part two

Enjoying the drama in Washington, along the southern US border, on social media, in cafes and locker rooms everywhere? There are unusual times in America. On the local scene, we have unusually low levels of inventory after years of buyers taking what they can find and very few builders providing new production for sale. Now that we have pretty much scraped the barrel clean, it will be quite interesting to see what happens to prices.

For example, the inventory turnover is, on average, less than 3 months for homes under $500K in price. That means the entire inventory of homes listed for sale under that price will be sold in 90 days or less. But why, you ask, will some homes still be around longer? New listings come along almost as fast as the current ones sell, so there is rapid turnover, but not all homes sell in 90 days. The ones that sell first are in the best condition, are priced to sell (not obviously overpriced) and are suitable for investors or for buyers to get financing.

Between $500K and $1 million, homes take a bit longer to sell, but still go fairly quickly using historical measuring trends. The Absorption Rate chart provided by this blogger (see left margin for access to view or download or print) indicates four and a half months for homes to sell, on average, between $500K and $1 million. That is well below what is generally defined as a balanced market period of time = 6 months.

Even homes above $1 million are selling in less than a year, again provided they are in good condition and are not too weird such that they don’t appeal to the average buyer. Just putting a million plus price tag on a home does not mean it will sell in a year. It might be a crazy floor plan, poorly decorated, near a major highway or just not built very well.

2019 will be a watershed year for our residential real estate market in the City Different. Based on our MLS stats, there shouldn’t be any homes left for sale by the end of the year. Watch carefully to see where the new listings come from. Some may be newly built homes, though not enough; some owners might decide its time to downsize or move on to greener pastures, some families will be going through changes, such as job loss or severe illness or death, or divorce can create a situation where a home becomes for sale.

Stay tuned if you want to follow these numbers. You can sign up to be notified when new posts are published, or just check back about the 10th of each month.

Thanks for visiting and for your support over the years. Contact me if you have a real estate issue that would benefit from consultation.