Fresh numbers that show we are working on it

That may be a lame title…we are working on it? You may decide how lame, but the point is that if your head is buried in something like sand, or paperwork, or personal problems, or worldly problems such as our POTUS election cycle and the sick drama it features, you might not know that we continue to climb the charts and continue to improve on our real estate market numbers. That’s a long sentence, but it says we are doing well enough to write about, just not as well as our neighboring states and what our bankers and creditors would want to see.

We still are selling foreclosures, pre-foreclosures, short sales and homes that are selling below what the owner paid years ago (underwater defines homes where the debt is greater than the value). Who knew that some nine years after the bubble started to burst that we would be still up to our necks in problems? If you knew then, what would you have done differently?

Asset managers still have a death grip on humorless communication as they try to unload stuff they should never have made loans on in the first place. Whether you blame the lenders for the mess we are still repairing, or blame the “political system” for the agenda and candidates facing off this November, we made the world we live in. Investors and stockholders wanted higher returns from those banks and mortgage companies (to support lavish lifestyles maybe) so they pressed for more loans to be made, more creatively and more more more such that every American could be a homeowner. Never mind that many had no nickel to rub against a second nickel, to coin a phrase. Many should not have been home owners since they had no reliable or steady income, no track record of responsible financial behavior, no savings in case of illness or a layoff. Yet we loaned them the money anyway.

Try selling a home in Chimayo or Pecos or La Mesilla or Madrid that has a debt well above the home’s value today. What do you do? Give it away? Discount it in a short sale and leave the lender with a deficit? Back to the election, what do you do when your choices are thin? Do you go with a third-party? Do you bite your hand when you pull the voting lever and pray that our America does not crumble as so many on all sides would have us believe? Do you start shopping for a home in Canada? Probably the best answer to these and similar questions is that you get to work. Yes you. Get busy fixing the world you live in. Get busy fixing the economy and the real estate market. If you want to super charge our relatively flat real estate market conditions, try bringing an additional 15 home buyers into the picture each month. But make sure they have income and good credit and maybe a years worth of payments in the bank. Try selling that 30 year old home that is priced as if the floors are gold leaf and the cabinetry is silver plated. The point is to sell homes to people who will nest there, keep them in good shape and build memories and lives in that home. The point is not to make some bankers and lenders extra money so they can buy another car and take an island vacation while we wait for trickle down. How was your trickle down?

Whats up with our market today? True that inventory is way down, keeps going down in fact, although we are now entering the typical spring season run-up of new inventory. It’s not “new”, by the way. These are older homes that did not sell last year. They are homes the owner stayed in or leased out after realizing they could not sell them a few years ago. Many people said to me and said to themselves back in 2008 thru 2012 that they would wait for the market to improve. They would wait for the market to catch up to their home’s true value and then sell it when they could get all of their money back. There is a special place at the back of the diploma line for those folks. Realistic expectations never landed in their laps and the market did not magically return to those days of liar loans and no doc packages that put people into homes they had no business owning, or living in. We learned that lesson. Why would someone wait for our market to return to the days of home sales that was completely unsupported by facts and real numbers?

We have seen about 10 homes a month sell in the One Million plus range for many months now. Let us home we can see that number grow in the next year or two since we have several hundred plus homes listed publicly for sale in that higher price range. A great target would be 12 or 13 a month! At the other end, below $500K and even more so below $300K, homes sell quickly and without much fuss. Buyers in those price ranges usually want and need to buy and would love to get settled soon; while sellers usually have little choice but to sell; the opposite of the high-end transactions. Try talking a seller of a $1.8 million dollar home into selling at a deep discount when their other two homes are in different time zones and are highly sought after prizes. It’s difficult to accept that their beautiful Northern NM gem is not worth what they paid for it a decade years ago.

Help yourself to the numbers in the various spreadsheets and charts available on this website and blog. They are for your enjoyment and education. They are not perfect, nor is the blogger, but we try to be fair and even-handed, never playing favorites or grinding our own axe when its yours that needs sharpening.

So sharpen away and feel free to share this information with real estate players in all price ranges. There is always something to be gained by reading and understanding.

If you need assistance, I know someone that can help you buy or sell. Or both. Contact the author.

Thank you.

Auld Lang Syne (in June?)

A song of goodbye and farewell, of happy trails, sayonara, adios, ciao… a song marking the end of a time and the grand hopes of the beginning of another time… Thank you Robert Burns. We have arrived at the end, the bitter end, of the deep and dark recession that has buried Santa Fe residential real estate under a mountain of confusion and blame. The economy is still mixed and other real estate markets are booming, but as of about noon today, the Santa Fe residential real estate market has passed the point of no return along the long and tedious road to recovery.

Whom are you blaming for the loss of hundreds of thousands of (on paper) equity you had in your home? Who is to blame for the nearly 10 years this excruciating period of business failures and personal losses has carried on?

Let us sing a song of farewell and goodbye to the bad old days and if we have to, lets sing it several times over and again to make sure we are rid of the negativity. For you intellectuals out there, here is the link to the Wikipedia entry: http://en.wikipedia.org/wiki/Auld_Lang_Syne

And what will the future hold? Will it be better next time? Will people stay safe and sane and not use their homes as ATMs and overextend with debt this time? Will mortgage loan sources keep their front offices in step with regulation and quality underwriting, or will the days of free money to anyone with a pulse return? Will contractors steeped in the Santa Fe customs and styles find a way to start building spec homes again (beyond the very short list of those now available under $500K)?

Seems hard to believe that a typical person could lose nearly their entire adult life’s worth of savings and investing because they had too much invested in real estate and not enough in government bonds. Bonds were always safe but boring; lower returns but more reliable. With everyone around making double-digit annual returns on their speculative ventures, it was quite difficult to stick with triple A rated and tax free securities. And so we didn’t. We bought rental property to expand our financial empire, we bought residential lots in popular subdivisions where growth was seemingly guaranteed, we took out a line of credit on the equity in our primary home to pay for an RV, a trip to Antarctica and a new SUV. Oh, and that dental surgery was not  exactly free either.

In early July when the data from the first six months of this year is in and calculated, we will gladly confirm that the worst is over. There is still somewhat of a mess to clean up, still many homes “underwater” and even a few more foreclosures showing up to keep a lid on appreciation in the immediate surroundings. But thankfully we have survived and can now start scheming to prosper again instead of patching holes in our best plans.

The latest statistics have been posted on this blog and I welcome your taking the time to read them and understand them. The comment section has been disabled due to all the spam I was getting, but if you would like to comment, you can find me by email; look at the info on the home page.

Happy summer!

 

 

It happens every year about this time

Are you a student of real estate and a close observer of Santa Fe NM residential homes and land? There is a phenomenon taking place now that compares with many other annually recurring events and themes. Think of the migration of millions of birds heading North. Or the run-off in the Rio Grande as the snow melts off of the mountains. Or maybe something less dramatic.

Listing inventory is going up, as I write and as you read. From the end of March to the end of April the percentage increase was nearly eight percent in just one month. April to May will probably be very similar. On a daily basis, the numbers are approximately 40 new listings every day while 25 are reported as sold, for a net gain of about 15 a day. That sounds like a gross increase of 450 listings in one month. More or less due to expireds and terminated and other such categories…

So a savvy buyer is probably glued to their computer screen to be the first to see the new listings as they show up online. Some brokers have developed methods of rolling out new listings in a manner that might allow special people (to be defined) to have a shot at those listings prior to the general public getting an email notice about same. Is there an advantage to being the first to know about a listing? Well, possibly there could be which makes one wonder about what is fair and what is not. Is the listing agent charged with the responsibility and the duty to market the property to the best of their ability? Something like that. Should we discuss whether this is still a buyer’s market or does someone know something new they would like to share?

Meanwhile, at any given time I open up the MLS program, I will see plenty of new listings of all sizes and shapes, in all sorts of places. After all, our market area covers a wide swath of Northern New Mexico from the Chama area to almost Albuquerque. Taos has somehow escaped full absorption into out market data by their own choice. They don’t want us Santa Fe brokers working their streets but they are not shy about working ours.

It still seems true that the first listing price is somewhat above what will become the final listing price. That is the way our market has evolved. I recall a recent referral in another city where things were much different. The day the listing hit the computer screens, there was a full-blown open house and 4 offers were on the listing agent’s desk by the end of that evening. They took the best offer and it closed in a normal amount of time and everyone was happy except those that did not offer enough money. It does not work that way here. Usually a home is listed for x dollars and sometime later, maybe 30 or 90 or more days have passed and a price reduction shows up. If the home was priced about 8% above what it would later sell for, the first price reduction might have been 2 or 3% of that gap. Then there will likely be another reduction such that when the offer does show up, the buyer is still not paying full price. If nobody prices their home at the price they expect to get when it sells, the game continues.

There are exceptions to this pattern. Some foreclosures are already so marked down that there is no room to negotiate further. Same with some of the estate sales we see, where the heirs to the estate want it gone in 60 days so they can move on with their lives. What would our real estate world look like if our listing prices were pretty close to the actual sales prices? The marketing campaigns would be more immediate and getting a crowd to the home on Day One would be the goal, with the home selling itself. This assumes repairs and cosmetic work was already completed, of course.

So just for fun, one could take a sample 20 listings from today’s new offerings and track them through their lifespan in our MLS database. 18 of them would have had at least one price reduction, based on past performance. I know, you can’t predict the future based on past performance!! But has the Santa Fe NM residential real estate market changed that much since last year? No, even wistfully thinking yes, the answer is no. We are moving in all the right directions. But we have plenty of ground left to cover to get to a healthy real estate market here.

We have been blessed with wonderful spring rains lately and more might arrive due to the El Nino effect we hear we are finally getting back to. That does not always happen this time of year. An increase of inventory of listings is inevitable, like taxes I guess. Spring rains are the pleasant surprise.

At the first quarter pole

Three months in the books and we can say the year looks promising, although best ever or wonderful do not need to be said. No predictions here, yet March this year was a busy month with more sales recorded (from the Santa Fe Association of Realtors database known as MLS) than all but 4 of the last 95 months!

And inventory of homes listed for sale is in a range that we have not seen in over 12 years. Lower inventory means more urgency on the part of buyers; at least that is conventional wisdom. But since we have not seen lower inventory here in so long, will the now strong fixation buyers have with price prevent them from seeing the market shift to a balanced or even a seller’s market? A buyer trying to time the market shifts is often unable to lock in real savings when you consider the escrow process and the time it takes to complete a purchase.

There continue to be pockets of price and location that are not exactly the same as the rest of our market. I believe that homes between say $600K and $800K are in short supply because there have been very few new homes built in this range in the last 8 years. Some areas have good activity and proven success for sellers that price their homes to sell. Some would describe Nava Ade and Eldorado as warm to hot segments of our market. Homes and ranchitos that are some 30 minutes out are not in demand, by comparison. And lot sales are still creeping along slowly, although renewed interest is noted as some future homeowners cannot find the right home and decide they will maybe hire a contractor and build. The numbers on that are still weighted heavily toward buying resale as labor and materials make buying new an expensive approach. Also, materials and systems within homes are advanced beyond the quality and integrity of 20 plus years ago so a new home might be worth the cost to those that want the latest and best.

It is fun, with pleasing results, to compare sales for any 12 month period between 2008 thru 2013 with today’s most recent 12 months. We are so much better off now its hard to fathom how we stayed strong back when 100 sales a month was the norm. Now averaging around 150 a month, there is a larger pie for everyone to have a slice. Will we get to 200 a month levels anytime in this lifetime? We were there in 2004 and 2005 and 2006 so yes, it is possible. But it is not promised. Many sales then were to buyers mostly unqualified to buy, without sufficient income and lacking reserves to weather the changing payments as rates fluctuated. There was also a large-scale recession that wiped out substantial middle class net worth and crushed many jobs. Do mortgage lenders that were in business 10 years ago do things the same way now? Absolutely not. They could not get approval on maybe as many as half of the buyers and borrowers that they placed 10 years ago. Ask them to confirm. That is just my ‘oldtimer’ guess.

It’s not a simple math problem to calculate where our market is today when comparing with the past. That darned real estate bubble created some space between reality and dreams that seemed to make those dreams possible. But many were not sustainable and our slog through the mud of foreclosures and short sales has kept us humble and working harder than ever to stay even. If one were to guesstimate what sales would have looked like 10 years ago if the same loan qualification standards were in place then as they exist now, home sales numbers would have been much lower. There is no exact way to know how much, but I do appreciate the comparison of then versus now because the improvement in our market is actually better than it looks at first glance. We still have some foreclosures, of course. Just not as many showing up as we saw just a couple of years ago.

Keep reading and keep learning if you want to be in a position to make the correct decision about your own real estate transactions. Ask lots of questions and ask for proof of statements that seem too good to be true. You already know how that works.

The foreclosure lessons

A couple of days ago, a daily Santa Fe New Mexican issue included legal notices of three foreclosure actions in progress. It’s public notice to publish the foreclosure action by a note holder against a borrower. Mostly the note holder will end up with ownership and possession of the property after a costly and long process. And the borrowers will be out, sometimes with serious damage to their credit scores and maybe a ruined marriage and/or careers. Kids will be transferred to new schools since the former owners had to move. Yes, they did not pay the mortgage payment and went into default. A narrow and cold opinion is that it was probably their own fault. At other times we have raised the spectre of greedy lenders making loans that were of such high risk that default was almost a promise; yet they made the loans anyway. OR rather, the loan officers and underwriters made the loans, usually with direction from ownership and management of the company they worked for.

Is it okay to say “we were just following orders”? You are welcome to comment on whether the people who profited from the liar loans and no doc loans in the recent past should have spoken up and stopped many of the unqualified borrowers from going ahead and buying a home or confronted their bosses about the large picture effect of so many unqualified buyers borrowing money they could never repay. They could only continue to pay if the home went up 10% or more every year and the borrowers constantly refinanced to roll the newly gained equity into a new and higher balance, with a new payment structure. Were crimes committed? Fraud is a crime, last time I checked, though difficult to prove.

So just this week the newspaper named above had three legal notices for three properties in foreclosure: one in Los Alamos, one in the Eldorado subdivision and one near Edgewood, NM. ( I just looked; none published in today’s issue)  I don’t follow other counties such as Bernalillo, San Juan, etc. I guess I should mention that 3 legal proceedings with published notices compares to the peak day from several years back when 31, count’em, 31 notices were published in one day. I recall a phone call I received from a fellow Broker asking me what was going on and was the market completely crashing? They were obviously concerned seeing so many legal notices in one day’s newspaper. I suggested the note holders were likely processing a large batch at one time and that’s how the publishing happened in such large numbers on one day. But back then, almost every day had some legal notices of foreclosure published. Foreclosures have slowed. They had to slow down. How many more homes and borrowers could still be out there and still in trouble? It seems as if we have survived the worst, and that is likely true. But as long as foreclosures continue, those homes will continue to put a damper on sales in the neighborhoods where they stand.

The lender will eventually gain title to the property and will place it on the market for sale. That home will likely be the lowest priced home of its size and shape in the neighborhood. So the family 4 doors down the street that is trying to sell a similar home will likely not be able to sell until the foreclosed home is gone from the list of available inventory. Note everyone wants to buy a foreclosed home; many have serious problems and defects. But a savvy buyer seeing a home at maybe 15% below the price of another home on the same street will probably want to pay less.

What is the lesson here? More than one lesson to be sure. Back in 2007 or 2008 or 2009, whichever year you might claim to have understood the problems we were facing with the bursting of the real estate financing bubble, our national government and the big lenders (also known as big banks) made a strategic decision not to force financial ruin on the big lenders (by forcing them to write down mortgage balances, lower interest rates or recast the payments into something the homeowners could afford). After all, we needed those big banks in our lives and many people had bank stocks in their personal retirement portfolios. The road not taken would have spread the pain among almost everyone one instead of just twisting the life out of a small percentage of families and homeowners that were unable to survive the storm. And we know what happened to the properties, too. They started to fall apart and deteriorate, but not enough to salvage the builders and contractors that went out of business when the housing market took a nosedive. So I guess you could claim that the neighbors of the foreclosed properties ended up taking a hit because of their proximity to those problems. Ask them if they would have rather lost 3% of their retirement portfolio value by virtue of some large banks failing without government support back then, versus the maybe 10% of value they cannot realize as they tried to sell their home while surrounded by uncertainty and vacant homes going through the legal system.

Back in October 2008, a famous time that almost saw the crash of the world’s economy, decisions were made to save the large companies that made those loans to the borrowers that actually did not qualify to borrow under normal lending approval criteria. What many do not realize is that the big lenders continued to make liar loans and no doc loans for a long time after it was clear that the housing market was tumbling into a huge ditch that would take 5 to 10 years to climb out of. Even in 2010, at a time when you would think everyone knew better, loans were still being made that were not properly underwritten to allow for the long-term recovery we were facing. Banks still wanted the fast profit and damn the future results. Some of those 3 year ARMs were not resetting until just a couple of years ago.

Three versus 31? I like the smaller figure much better. It seems easier to digest. And digest we must to finally move past the great recession that has strangled us without mercy for almost eight years now. Let the constipation end! Someday really soon our market will get into balance and both buyers and sellers will be able to do business over a title company settlement table without having to account for other’s mistakes and crimes. Lessons learned are sometimes necessary for us to truly move forward.

Maybe we shouldn’t dwell on past mistakes. I agree with that and will gladly report the good news as it develops. Let me assure you I have been striving to report the good news along with any other facts that are relevant. The bright spots in our little real estate market in Santa Fe, NM are not to be ignored. We just need to create more of them. Is this going to be the year?

In with the new seasonal mix

Ahhhhhhh, Spring!   When pollen fills the air and hope fills the real estate marketing pages, you know it is springtime. What should we expect? Inventory will rise dramatically from now until at least June. While we continue to sell and close, new listings will show up in greater numbers, so the overall picture will look worse for a few months. But late summer and fall seasons will see a slowing of new listings and a gradual increase in sales (if the last 25 years of history can be believed) such that about November, we should be able to predict what sort of year we will be completing. Big deal this predicting business!

From the home page you may access several spreadsheets and reports full of data relevant to the Santa Fe residential real estate market. This information is free and as long as several of you contact me and we do some business, it will remain free for all to read and share. The price of poker has not gone up. The price of real estate is not going up either, just yet. While the worst of our burst bubble has passed, there are still enough foreclosed properties to work through that their influence on our market continues to sway lower. When you have similar homes for sale, one a foreclosure at 445K and another well maintained home at 560K, what do you think a buyer will want to do? Yes, they will want to pay less. See prior post about Price is Everything.

A Zillow fan says the site shows appreciation in homes in Santa Fe. I am not sure if this is a certain price range or an overall impression. There may be actual appreciation in some homes between $500K and $1 million due to a perceived lack of quality inventory. There also may be a slight climb in values in the lower price ranges due to demand equal to or greater than inventory. This does not mean we have bidding wars for homes, although that could happen for a home priced to sell right away. Yours truly will spend some time on Zillow (not on my daily chores list) and see what it is saying about Santa Fe home values.

Some of the most desired real property in the area is currently for sale. Actually this could be said almost any time, but lately some sellers have finally tired of waiting for a full recovery and placed their property on the market to start the process of moving on. Many held back when they realized they could not get as much as they had paid when they bought a few years ago. That concept of a residential property working like an ATM machine was a difficult image to forget. If you are looking for true Santa Fe style in a home, million dollar views, a chef’s kitchen, immaculate condition, creative and practical floor plan, fresh flowers on the table, recently dusted and polished also with beautiful landscaping, there is a home for you out there. Your price range will affect which home you choose, but to someone, every home looks fantastic.

Did you know your favorite real estate sales professional is actually many other things in addition to the one your think you know? Some examples include: a computer wizard, a marriage counselor, a babysitter, a dog sitter, a mind reader, a tour guide, a contract negotiator, a mediator, a prophet, a restaurant guide, a cultural student versed in all things Santa Fe, an outdoors person, an avid reader, a source of referrals for home services, a friendly sort, wise but not too chatty… oh heck, there are so many more. Ask your salesperson which one they enjoy the most. Or ask them if their skills include the extra stuff you will be needing during the process of finding and closing on your next home.

Enjoy the springtime and may your garden blossom with fragrant flowers and produce a bounty of fresh vegetables. Contact me if you are wanting to know more about your neighborhood, your home value, the market trends that affect your future, or even if you want to hire the honest mature wise and funny old guy that writes these posts and takes excellent care of his customers. Testimonials available on this site!