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

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.

2018 in review = part one

Actually in the rear view mirror, we’ll now look at 2018 for statistics relevant to Santa Fe residential real estate. I’ll point out a few things available for you to see on the spreadsheets and charts I have posted (see left margin for access to same).

An annual posting known as Fourth Quarter Sales shows the serious effect of the lack of overall inventory with the most pronounced shortage in the “low end” of homes sold below $500K. Yes, I know what you are thinking; that a home selling for $495K should not be considered “low end”. But this is Santa Fe we are reviewing where the average sales price in 2018 (Santa Fe county and city) was $493.715. This is out of an overall sample size of 2429 homes. In that report, the total sales for 4th Qtr 2018 were less than 4th Qtr 2017 and the obvious shortfall came in the under $500K range. All other categories went up. I would venture to say that if there were more homes available for sale, at least another 70 to 90 homes would have sold in that price range. And maybe they did sell; just not reported to the SF Realtors Association MLS database.

The next report I will suggest you look at is called Residential Lot Sales (again, from the list on your left). This annual report shows a still muted activity for lot sales in SF county and city. Why is that? Several reasons come to mind. First, the old saying that is still true… “get lots while you are young”. And another popular saying is “they aren’t making any more land so buy now”. And yet another possible reason is that the real estate crash that has devastated many individual nest eggs over the last ten plus years saw lot sales drop (again see chart) from annual units of in excess of 600 to just 257 units sold in 2018. And yes, there could have been plenty of sales not reported to the SF MLS database. I know Realtors try to report sales to help make the data more useful, but sales between friends, family, associates and sales without a Realtor involvement are not going to show up in these figures.

Did 350 sales just disappear? Yes, quite so. When a lot in Las Campanas sold for $210K and years later sold again for $85K, something tells me that investors are going to stay away from residential lots as solid investments. That is just one example, but those exist all over the place, if you can find the data. Average sales price now is similar to what is was in 2002 and 2003. While it went above $200K in subsequent years, it went back down and has not been above $200K since 2008. The transition from ’08 to ’09 shows a decline of 63% in unit sales and a drop of more than 25% in average sales price. You could say that was the day the music died. Who was left holding land and lots with a fairly high amount of debt? We all know at least a couple people like that. Did they survive financially? No, they almost all had to deed lots back to their lenders or face expensive and drawn out foreclosure action that might also have included bankruptcy. Lot sales are not a fond memory lately.

I will continue this review next week after I get in some alpine skiing and some much appreciated rest. At my age I am a more careful skier and a more fitful sleeper. Naps are glorious.

Steady as you go

I am pleased to share updated statistics about the Santa Fe residential real estate market in this autumn season of 2018. You will find several spreadsheets and reports available for viewing (and printing) on the left side of each of the blog pages you wish to view.

Please note the consistency of finding out that the Third Quarter 2018 sales matched the same Quarter from 2017. When I crunched the numbers I was amazed that we had exactly as many sales this year (over the last 3 months) as we did last year. But do take a look at the 3rd Quarter report because it clearly illustrates how short of inventory we are in the under $300,000 range. Actually I would say we are short of inventory of homes priced at $500,000 and below, but the lowest range really hits home showing a decline in sales below $300,000 year over year.

A prediction that might not be too bold is that if we had triple the inventory in that lowest price range, the sales of those units would have at least doubled. But it is what it is and for many years people living in Northern New Mexico have often had to settle for a manufactured or mobile home that they can afford. The average sales price over the last year is over $485K while the median sales price is $365K.

While the Third Quarter last year and this year are identical in total sales of units, sales in the middle and upper price ranges made up for the decrease (due to lack of product available) in the lower ranges. I think it is safe to say that total sales for the Quarter just completed would have been over 700 units if there was more to choose from.

Annual precipitation is yet again below the average for this date this year. The last chart I saw showed we had rec’d just under 7 inches so far this year while the historical average is over 1 inches. So when is this drought going to break? Or is this the new normal and we are now getting what we can expect to be the average for the near term future. How fortunate to be far away from the hurricanes and tornadoes that ravage our lands and people. We only have drought and a very rare case of the plague (sounds medieval) and hantavirus. And having spend some time in the Southeastern USA recently, we are fortunate not to have mosquitoes in thick swarms here.

You have to give credit to the typical Santafesino for being so frugal and careful with water use. Almost nobody has a visible blue grass yard (though I have seen some back yards with the water hungry grasses). I would hate to be selling lawn mowers and leaf rakes here.

Get your costume early so you can practice eating the Halloween candy that you will be collecting soon. It’s not my fave holiday so I will probably be sitting in the dark at home not answering the door.

Thanks for visiting my site. Its a bit of a labor of love for me so I always appreciate anyone that gets use out of it. Let me know anytime you want to say thanks. (insert big smiley face here)

Careful what you wish for

You had plenty to be worried about over the last 10 years including ‘will my home ever sell’ or ‘will I ever see my 401-K regain the level it was at before the storm’. You didn’t know if you’d ever get what you paid for when you finally sold that house. You would have loved to have sold in 2011. Or 2009 or 2012 or last year. And now in 2018 you may be able to sell it fairly quickly, but for enough to get back what you lost to the economic recession that wiped out your life savings and stock portfolio?

We have always wished for a full recovery from the real estate crash and we might finally be able to say with utmost confidence that we have achieved that. And you might also be thinking this sure doesn’t feel as good as you wanted it to feel. Now that you cannot blame impossible mortgage loan requirements and scarce money, plus the plethora of foreclosures clogging up the market, what is the problem exactly?

In a textbook example to illustrate, M/M HomeOwner paid $475,000 for their dream home in 2006, with the help of an 85% mortgage. The payments were pretty high, more than double their rent costs, but they had a bright outlook for the future and wanted the big and rambling home. After several years it turned out not to be their dream home for a list of reasons. So they tried to sell it in 2009 and their Realtor told them they MIGHT be able to get $350,000. Something had gone horribly wrong in the real estate market, and in fact the entire economy was flatlining. Well, their mortgage balance back then was $405,000 which scared the bejesus out of them and they “held on” to the home, making payments to stay out of foreclosure and the ruin of their credit. They did not replace the carpet or upgrade the master bath as funds were tight with payments and all.

Gradually things got a little better and in 2012 their favorite Realtor told them the home MIGHT sell for $400,000 and their balance by then had dropped to the same amount $400,000. But they knew the home was not going to show well with that heavily worn carpet and broken down fridge and dishwasher and stained countertops plus all the stucco cracks. They were told the cost of sale would represent about seven percent of the final sales price. They were not ready to take that hit and sell it on terms that would require them to bring so much money to closing. They barely had two months of living expenses saved up what with college for the kids and his car that he needed to commute in. So they stayed and kept making payments. They were not happy but they had a roof over their heads.

And then, the magical year of 2015 arrived and they finally started to think this was going to be their year to sell. The economy was much better and economic pundits told them the real estate crisis was over. Appreciation had started to become a reality again (in the lowest price ranges) and they were very optimistic about selling and walking away with a little cash. So that Realtor, who had moved to a new virtual brokerage by then, was asked to do another market analysis. The conclusion was a selling price range of $450,000 to $470,000, almost as much as what they paid in 2006. But homes were still taking almost a year to sell and the homes in great condition usually sold first. They had to figure out how much they could put into their home to bring it up to date and make it show so well that a buyer could not ignore it. By this time, since they had neglected almost everything about the upkeep of the home in their nine years of living there. They got some bids together and found out they would have to spend some $50,000 to make it shine and hopefully be irresistible to a buyer. It could actually run up to $80,000 if they went crazy and did everything. With their mortgage payoff at $390,000 plus the $50,000, their sales price would have to be north of $475,000 to close without having to bring cash to closing. That was above the range their trusty Realtor provided, but they were ready and hoped they could find the right buyer at $475,000.

IF THEY COULD find a buyer at $475,000 with minimal further reduction in price for items found in the inspections (remember they were going to spend $50,000 to upgrade), their seven percent cost of sale would drop the net, prior to payoff, to a bit over $440,000. They also had to payoff those credit cards for $50,000 from spending to upgrade the home. Payoff of $390,000…? Yes it could actually work. So they listed the home at $495,000 hoping to get a buyer to buy for at least $475,000. Professional photos were posted online after they decluttered and made the home look as close to a “model” home as possible. It did show well, but that effort and expense just put them in the middle of the pack of existing and new inventory. The absorption rate hit a plateau and many others in similar situations also had put their homes on the market. Since there were only so many buyers, their home did not sell right away. It was only shown six times in the first month and after 60 days they met with their Realtor to discuss lowering the price.

So they lowered it to $479,500, still hoping to get really close to $475,000. But after it was passed over by buyers looking to spend about $450,000, they had lost out on a good portion of the peak season and were still a bit overpriced. They thought if someone wants our home they can make an offer. That kind of thinking can lead one into belief that their home is priced to sell. But it did not sell. They had one buyer on the hook, but his mortgage was declined so another 30 plus days were wasted. Desperation was looming as they had really wanted to sell six years earlier and now they had planned to move out this very year. But they gave up trying (living in a home listed for sale can be stressful and restrictive) and they terminated their listing and fired their Realtor, blaming everyone in the process. It was almost Thanksgiving and they assumed home sales stopped in the wintertime.

AND NOW a new day has come. 2018 has arrived and they are damned sure going to sell this time for the amount they want and finally get beyond this ugly chapter in their lives. Their marriage has been severely strained, they have had to deal with illness and career goal disappointments, but there was finally a way out. The new Realtor they contacted, who had been in the business about 12 months, but was best friends with his mother, took the listing at a price of $540,000. This would be great, finally, they thought. The mortgage was lower, they owed less on those credit cards and the market was heating up to the point their new Realtor said they could sell it in 90 days with some good fortune and the right buyer.

And they did sell it in 90 days this year, getting a net bottom line enough to pay the mortgage and credit card balances in full and walk away with some cash. They celebrated by taking a trip to Italy and Greece and renewed their marriage vows in the process. They held off buying another home while the burn scars of owning the prior home were still healing. Renting was fine with them. Their credit was just good and they had an empty nest situation as the kids were grown and gone. They never spoke to the first Realtor, but that old veteran was used to failure and rejection. She could always find a way to put on a smile and speak positively, even with the down side of her business.

Is this a happy ending? Would they have ever chosen to write this script to live out in real-time with the goal of having a happy ending? How much did they worry and stress during the 12 years they owned that last home? Their kids saw them arguing and fighting on a regular basis. They did not take vacations and did not take good care of themselves during that time of worry and despair. His mother-in-law scolded him incessantly. Her father-in-law, after a serious stroke, seemed to not have the same fondness for her as before when they were younger and happy.

What else could have happened? They could have decided to walk away from the home in 2009 or 2010, when they owed more than it was worth. They could have mailed in the keys and likely been stuck for a deficiency balance for the amount between what the bank sold it for a year later versus their outstanding debt. That or all of the other burdens and mistakes could have placed them in bankruptcy anywhere along the timeline. As it turns out they did not ever declare bankruptcy and these days are wondering why they thought it was the wrong thing to do back then.

They might have sold it in 2013 with an agreement from their lender for a carry over debt to cover the short sale net amount that their did not get at closing. They might even have been able to negotiate a complete forgiveness of the short fall on the payoff.

Maybe they should have just stopped making payments and lived in the home for free (except utilities) while they fought foreclosure. This might have stretched on for 2 years or so. Of course if they were going to do that, they really should have put aside at least $3000 a month toward their future lives and a future home for themselves, but most people are not that disciplined.

What does it mean to have a foreclosure on your credit record? And a bankruptcy on top of that? After enough years have passed it might mean nothing. But back in 2009, they never imagined it would be nine more years before they would see a sale. Very few people predicted the long and painful recovery process that took basically ten years (in the Santa Fe area anyway).

Sometimes I go back and read the archives of what real estate counsel I was sharing from ten years ago and it was not pretty then. It was honest and negative; mostly gloom and doom. I was critical of most every part of the process of doing real estate business. Mostly I feel the largest mistake made by us all (and it would have been almost a miracle for it to turn out differently) was to not take the problem of millions of homes in foreclosure and millions more underwater and make federal laws that mandated a faster and equitable recovery for all of the people involved and all of the banks holding the notes. What did happen cost the federal government (and all of us taxpayers) a great deal of money, but they paid it to the banks that made the “bad” mortgages instead of actually paying down the mortgages allowing people to stay in their homes. The upheaval make a mess of many lives of Middle Class Americans. This subject has been the focus of many a book and article. What did we do wrong? And what did we not do right?

Do you want to pass judgment on the last 10-12 years of Santa Fe residential real estate? Feel free. My take on the single largest factor in our local scene is the thousands of mortgages made to borrowers who were not even close to qualifying for a mortgage, using conventional underwriting standards. Even allowing for payment of MPI and the VA/FHA programs that OK a small down payment, far too many loans were made to people who did not qualify. And then values plummeted and stayed down for years making certain that anyone who was vulnerable to that reality got a chance to suffer financially.

Hindsight is wonderful, si? no?

Praying for rain in Santa Fe…

Strong, stronger, strongest

We can cheer and smile just a bit as we continue to build on a strong year, the strongest in many years, and stronger than we have had the pleasure to brag about for some time… The unit sales numbers for Santa Fe residential real estate are running at or above a 10% increase over last years unit sales numbers. That’s some news you can smile about.

Various spreadsheets and charts are available for your review if you enjoy digging into the historical trends and current versus prior tallies. Look on the left margin and select the report(s) you are interested in. Try the Third Quarter chart and note the increases in the 1 Million plus price range, 2016 and then 2017. That is a 42% increase. The entire Quarter, including all homes in the sample, went up 13.6% this year compared to last year.

Inventory is actually pretty low in the more affordable price ranges, with barely over 4 months of product  (using my absorption rate formula), while the overall market inventory to be absorbed, using the current rate of sales, is only 7 months. That is within shouting distance of a “balanced market” and based on recorded history in Santa Fe residential real estate, it IS now a balanced market here. While we have lagged other cities in our part of the US, we are healthy and solid in our growth lines without wild fluctuations that later could result in another bubble bursting… I can almost make a prediction, but I will not because I am careful not to, that we will not see prices and home values going down anytime soon.

But will they go up? Now that we are in balance and not very many new homes are being built to meet the demand for the smell of fresh sawdust, we are likely to start seeing actual price appreciation by mid 2018. It could come sooner but we are entering the cooler months and our winter time sales are usually slower; not as robust as summer and fall. Are you looking for a promise that homes will go up in value next year? That’s what you want? Anyone who promises anything like that is certifiable crazy but it very well could happen. I would be delighted to see some consistent across the board appreciation finally.

Get your deals while it’s still 2017 if you know what I mean. Next year could see the sellers tighten up and be less flexible on price and terms, knowing their home is one of only a few available with the quality and location everyone wants. The beautiful adobe in the more distant hills may not notice the market changes as those homes are less compliant with popular buyer location desires. Sellers, plan now to begin your marketing for next year. Buyers, get your pencils sharpened for the deal you want before next spring brings highly optimistic sellers to the dance. Or just buy or sell when you are ready to pull the trigger. Deciding when to do something based on market trends is not always profitable. Better to do things that work for your lifestyle and schedule than following what the masses are trying to do.

The day of the week of the month of the year

The charts and spreadsheets available to you on this blog site are now updated to include sales and inventory as of the end of August 2017. Eight months into the 2017 books and we are running a nice and tidy 12.3% above last years numbers in unit sales for Santa Fe city and county. That is music to many ears. To finally have consistent growth and improvement in our market is a welcome milestone. Remember all real estate is local and each home and neighborhood have distinct characteristics.

Nobody said it would be easy and it has not been easy to climb out of the deep hole that the economic crisis put all of us into. But we have succeeded and are not planning to fall back in anytime soon. There was a place and time (maybe around 2009 and 2010) when I firmly believed that residential real estate could lead us out of the real estate downturn, the tremendous loss of personal financial wealth and “loss of savings in the form of home equity” that we experienced.

It would have taken a mea culpa from the big banks (the ones too big to fail) accepting the millions of bad loans they had on their books as truly bad loans. It would have taken them swallowing a huge pill of write-offs, effectively lowering the principal balance of millions of home loans by tens of thousands of dollars. And all for what? To be done with the depression years sooner? They got bailed out (at least the ones that did not close up shop) so what did they care? The personal health and well-being of the CEOs and stockholders of those big banks would have had to admit to stupidity and white-collar crime, but it would have gotten things upright in a much faster timeframe.

No it did not happen. They took the bailout terms and never admitted guilt. They foreclosed on millions of Americans who were lied to when they bought homes they could not afford. The big banks profited when the loans were made and got insurance on most of the loans that failed to payoff in full. Those consumers that were innocent and actually qualified for the home loans they took out still suffered because of all the other junk and debris around them. Homes were sold for $400K that were worth $325K. When the home buyer moved in, the appraiser said it was worth $400K. But after the 3rd year of fixed payments, when the monthly debt service doubled or tripled, then the owner had a home worth more like $300K or $325K so if they owed $350K, what were they supposed to do?

I know of many that lived through the storm and did not abandon their homes and declare bankruptcy and/or sign a deed in lieu of foreclosure. They kept paying every month and yes, sooner or later the balance came down enough that they no longer owed more than the home was worth. It took ten years or possibly longer. And the entire time they had no increase in net worth and spent every cent they made keeping the payments up and not taking vacations.

What is your recollection? Here is mine. I am a little bitter about the dishonesty at the top of the money pyramid, and also a bit proud that I did not cave in and deed my home to the bank when it was worth less than I owed against it. Now that its finally worth what I paid for it in 2001, I am selling it. Maybe the money I spent on a new roof, new stucco and other necessary things is offset by the deduction of mortgage interest? I sincerely doubt it, but will do the math if it will help me accept 16 years of ownership and upkeep just to have nothing to show for it now.

The lesson that a home is not an ATM is not that difficult to learn. I never treated my home like an ATM. I used equity to pay for roof and stucco and other things the property required. The tough love that homes do not always go up in value is something I still see people struggle with. They expect their home to be worth more in the years after they purchased it. But in Santa Fe residential real estate, is that a reasonable expectation? Ask your friendly Realtor to help you arrive at a market value. No rules apply evenly to all property.

Remembering the tragic events of Sept 11, 2001 brings humility and respect to front of mind. We only are handed this one life and we should live it to the fullest every day. With hurricanes bringing pain and suffering to so many millions, being thankful for what we have is an everyday event. And if we can help others we are better people for taking action. We all have so much to share.

Every dog has his day

…said someone, once upon a time. I am not going to research the origination of that saying, but it sounds like something Mark Twain or Will Rogers would have said. Or possibly Richard Nixon. And so we find ourselves in the third quarter of the year with continued improvement in sales results and still very reasonable interest rates. The town is heaving with visitors and activity, although most Realtors I know want more showings on their listings. I guess I do also, because homes need to be viewed before they will be purchased. Where to begin? When Amazon starts selling homes from their website, then we will know this dog had his day.

Look at the numbers in the spreadsheets available on the left side of these pages. In all price ranges, the average months to sell has dropped from 9.68 to 7.38 in just the last year. In the popular one half to one million range, the drop was more dramatic, going from 15.46 months on average a year ago to 10.56 months on average now. The absorption rate, which is what we call that calculation, is faster when inventory is lower and sales are up; both of which have happened just since last year. This is a trend line that I have consistently been tracking since we found ourselves in the gutter after the bubble burst. You know that bubble? The bubble that had many believing homes never go down in value and often go up by double digits every year. Everyone was wrong. Competition existed on who saw the crash coming first, but nobody escaped without serious damage. Some are still in recovery. Just now we can say we have almost reached the level of activity we saw prior to the crash and that bursting bubble. Only this time we are on a solid foundation as to value instead of seeing high appreciation unsupported by the large majority of sales. If you spend $750,000 on a home today, it is not likely to go down in value in the near future, unless we are in a nuclear war with seas rising a foot a year and anarchy is the law of the streets. Will it go up in value? Maybe someday, but that depends on you the owner.

Fears of overspending on a home should be all but erased, although it’s still possible to pay too much. No question there are plenty of homes listed for sale where the asking price exceeds the likely final sales price. But buyers have become extremely price aware that price has to be resolved first, then the other issues (location, condition, style) can fall quickly into place. All the sayings about there being a home for every buyer and a seat for every butt will be tested as we move forward with less inventory and a fairly strong influx of buyers. Some buyers become disenchanted once they examine our metropolis and others feel the prices are not justified. But some just have to have it as their own. And we can accommodate those newcomers. Changes happen slowly in an area with such long history. Affordable housing has been a headline seeking a response since I came here in the early 1980s. And likely before that. We still have that problem; witness all the manufactured and mobile homes in every rural quadrant of Santa Fe County and beyond. Last I heard, about 50% of all homes in New Mexico were not site built, but were moved onto the site on a trailer.

This market is healthy, wealthy and wise, to coin another phrase. Or like an old boss of mine (while I lived in Denver) said of himself, “fat, dumb and happy”. Those are things one could aspire to, I suppose.

Get your house while you can, while there is an inventory to choose from. The builders we need to build homes are trying hard to risk speculative home starts and I hope they are amply rewarded. We need more of those in all price ranges. In the meantime, learn your dog some new tricks.

The cat wearing the hat

Your time spent online is yours alone, taking advantage of all the sources and distractions available. This can include reading current news stories, fake or otherwise. It could be sports scores or it could be health advice and new developments in human happiness. A cure for insomnia and relief for those with ingrown toe nails is out there also. Shopping can make you feel better sometimes. You might have to dig for a while or drill deeper than you thought at first, but sooner or later you can find almost anything you want to find on the WWW. Have dinner shipped to your doorstep. I will come by to dine with you.

If you have children and a spouse, and/or friends you connect with daily, its possible your online addiction could limit how much you have to give to those relationships. Maybe they are supporting your habit until you wise up and start participating in life with them again. Online addiction might be only surpassed by opioid addictions. Possibly the others are just as addicted and have not yet realized it; too distracted in their own way to notice your absence and fried brain and bloodshot eyes.

At times, I don’t want to look at the screen, but am willing to listen to the audio of an interview from a TV show, or a TED talk or podcast that dips into a subject of interest to me. Closing ones eyes can feel so liberating in a time of device screen paralysis. Unplugging from the short term pleasure of the skimpy rewards that being online gives you is not easy. I dropped off of Facebook months ago, after many more months of almost no activity or visits. Too many posts of kittens? Yes and too many nonsensical rants about Amurica and who has the right to believe what. I admit to getting news briefs from Twitter, in bites I can digest and at a time I want to take them in.

If I were a video or digital picture artist there are more venues than there are grains of sand. I could post a shot of each piece of toast I consume, with butter or not. I could post pix of my drive to my office, my walk from the parking lot to the office building, and my coworkers standing in my office door complaining about their current state of affairs. It might be fun to share photos of places I have been if only I were a more accomplished artist with a camera. I have photos of beautiful sandy beaches, castles on hilltops, amazing historic ruins only recently excavated, a beach wedding service, a farmers market in a foreign city, plus the selfies with me in all manner of dress and mood. How much fun can a person have?

In words it is left to the reader to paint the picture with a push and a tug from the writer. I write about real estate in this blog, touching on social issues that affect real property directly or indirectly. I occasionally rant about the things I see going on, but also realize if I rant then you are ranting too. Send me yours if it will balance things out between us. Words and numbers are the primary focus of my blog and I hope those numbers are easy to understand and useful to you. They continue to improve just a little bit each month and our residential real estate market in Santa Fe has solid footing and is almost completely finished clearing out the deadwood of foreclosures and short sales. The days of the super bargain are probably gone, even though those were not really bargains after all.

How many calls have I gotten from someone who sees a pretty photo of the front of a home that is listed at $220.000 with over 2000 square feet and 4 bedrooms plus a garage? Why is it so cheap? Well, the actual condition of the property is why. When you see a home in our MLS database that looks too good to be true, it has probably already been picked over by many people with similar ideas. How can I buy this and fix it up a little and flip it for a quick profit? An example where there was enough profit for two buyers went as follows:  First buyer purchased out of foreclosure around $120K and did minor touch up and painting. Sold it for $150K in a couple of months. Then Second buyer did more work to the home, leased it out for a couple of years and then sold it for $215K. Two parties made a few dollars on that one property. Today it is likely worth $250K and might be sold for that if the current owners wanted to sell.

So the cat with the hat is fun and entertaining. So are the Epic Fail clips. Reading Paul Krugman opinion columns online can be educational. Observing the White House roller coaster would be a hoot if it was not so disturbing. Seeing how your stocks are doing is fun as can be lately as the stock market breaks new ground almost daily. And seeing what your neighbor’s house is selling for is also interesting. Focus on what sells, not what is for sale. A for sale home priced at $500K does not inform you nearly as much as the home down the street that sold last month for $445K. Or the one around the corner that sold in May for $467K. Asking price is a suggestion. No more no less. The owner suggests your written offer to purchase should match the asking price or come as close to that number as possible in order for them to respond to the offer in a meaningful way. Ignoring an offer is also meaningful but in a different way.

Santa Fe sellers still collectively hold out a candle of hope that their home will sell quickly and for full price. But history, recent history being the only type that matters here, shows only the lower end price range homes in and around Santa Fe sell quickly and for full or almost full price. Why do other markets do things differently? In a recent referral of a listing ($280K range) in a Phoenix suburb, the broker I contacted did extensive market research and had the sellers do some work to the home before marketing it. Then the first day it was for sale was an advertised open house and 30 people came. Four offers came out of those visits and the one that won the bidding war paid about $11,000 more than asking price. The home closed on time and everyone was happy.

What is the difference between that market and ours? Here the seller and listing broker will price the home somewhere between 3% and 12% above what it will likely sell for. Then they battle to get people in the home and interested in the property. Time goes by and the broker and seller discuss a price reduction. When that hits the internet there is a flurry of activity on the home; some showings and some phone calls with questions about details of the home. But no offer comes and so after a few more months, another price reduction is entered into the system and another flurry of activity starts. Each time the new price is entered, a new group of prospects shows up online or in person. Once the asking price gets really close to the eventual sales price, then negotiations begin and serious contract preparation commences. A meeting of the minds occurs and escrow begins. Once all issues are resolved the closing can occur. And everyone is happy we hope. But maybe the seller waiting say nine months to sell and could have received the same net proceeds in two months had the first asking price been closer to the actual value. And we know that the actual value is what someone will pay for it, not what the seller has invested in it or what they hope to get. I hope to get to the top of the Eiffel Tower someday but I am OK if it does not happen. Sellers maybe should find a way to be OK with a faster sale instead of the same results after many months of anxious waiting and blaming the listing broker. It takes an honest assessment of the market and a Realtor willing to tell the truth to the seller.

Some sellers are not in a rush. Those people have alternative motivations and timelines. They might have $1,200,000 into a property and have already bitten several bullets to get the asking price down to $950K, while in everyone’s heart the final sold price will be closer to $850K. Is this normal for our market? Yes it is. Many examples are out there that are similar to the above recap. A buyer’s task is to separate out the highly motivated sellers from the ones that are just testing the market. Like the wolf going after the slow and slightly lost calf in Yellowstone, buyers will find the seller that wants to make a deal today and is not willing to wait 6 months. If you want to be that seller, that buyers surround and attack, price is your primary weapon. Price it to sell or price it to sit and look pretty. You can find your place in a magazine and wish they used different photos or you can be at the Bank depositing your sale proceeds.

When I get a cat I am going to get him a hat. Until then thanks for stopping by this blog site and feel free to use the statistics with proper attribution. You can disagree or you can do what many others do, use this information as if its your own. Then get a good nights sleep. And turn off your phone.