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.

A moment of balance

Librans like to focus on balance and harmony. There is a time when balance in the real estate market can be found and its right about now. This is the time we change over from cool to warm when taking the temperature of our market. We’ve had enough of tepid. What happened in June is quickly washed away by the increase in activity and showings in July and after. It would be easy to be pessimistic in early and mid June because that wave of buyers has not returned quite yet.

You know the ones I am talking about. Buyers who have looked at homes off and on for several years might be coming back for real this year. Buyers who have waited to time the market (good luck on that one) might figure out that this year it is finally time to buy, while we see the creep up of higher interest rates and the shrinking of quality inventory. At any time, such as 2 months or 2 years ago, one could make the case that now (I mean then) was not quite the time to buy. If that even entered your thoughts or affected your actions or planning, allow me tell you that time has passed. There is no better time than now (or in the next 120 days) to buy a home in Santa Fe. Not yesterday or 2010, but now.

Why would I say that? Think of the past 8 or 9 years with not only zero appreciation of home values, but actual documented lower prices and values. That might finally have run its course. MAYBE we will start to see appreciation later this year and next. Interest rates? Yes, that is a direct factor for about half of home buyers in our market. Every quarter point increase in rates will knock out a percentage of buyers, or at least force them to buy a less expensive home based on their qualifications. The inventory of homes available is smaller than at any time in recent memory and almost no new homes are being built that are not already pre-sold to a buyer. The exceptions are worth a look. So the new inventory is coming from where, exactly? From homeowners that are ready to pull out and ready to sell, whether the home pays off all of their debt or not. There still are short sales coming up and there is a mini wave of defaults also coming, as a large number of HELOC loans convert to amortization from interest only terms. An example: an old friend’s HELOC (home equity line of credit, usually a 2nd mortgage) payment went from $180 a month to $650. He is not sure he can afford that and may have to default. It is not news that many people, even owners of homes, live paycheck to paycheck and a change throws off their ability to have that tooth crowned or set up that family doctor appointment. Never mind the trip to Alaska…thats out of the question.

To balance your checkbook is one thing, but its another thing entirely to achieve balance in a real estate market. As we shift to more of a seller’s market (we are not there yet, but steadily moving that direction) that tipping point when sellers and buyers are on level ground will exist, if only for a month or two. I have no idea how long we will be in balance, but lets enjoy it while we can. Librans really know how to talk about balance. I hope I have come close.

Another example of viewing balance in a real estate market is comparing new listings to sold listings. There are always more listings than there are solds. Some go on the market and never sell. Other listings expire after 6 or 12 months and then a new listing might take its place. That’s at least two listings for one sold, if it does in fact sell during the 2nd listing term. Over the last 15 days, per our MLS database, there have been 245 new listings and 175 sold listings. Thats about as close to balance as we could design and invent. Compare to early spring when new listings outnumbered solds by 5 to 1 or even more at times.

So where exactly are we? Of sold homes reported to our MLS, something like 90+ percent, had at least one price reduction since first listed. Clever and sly Realtors and homeowners can scheme to hide the truth of how long a home was on the market. Ask if it matters to you. There is a magic number/price for listing a property. Most all listings start above that number and then settle for the true market price. That true price is literally what someone will pay, and does pay for it. Santa Fe residential real estate buyers expect to get a price below the asking price, while the market is still favoring buyers. Once the shift kicks in and we enter the seller’s market we are heading into, that might eventually change. Except maybe not. By then, sellers will expect to get a higher price instead of putting it out there at a price that will bring immediate offers. So who can blame a buyer for making a low offer? A seller has the right to be insulted by a low offer. But insults don’t write checks and show up at closing, so bully for your right to feel that way. Get over it and counter with a number you like and start the negotiations.

Buyers almost never start with their best offer. A most recent example: the first offer came in at about 12% below asking price. During the back and forth of negotiations, another buyer stepped up and made a strong offer. The seller decided to ask both buyers for their best new offer and both responded. The first buyer ended up paying a price about 1% above asking price. What will that 13% additional net proceeds mean to that seller? Why did that happen? The seller not only did not have to lower the price; the seller got more than asking price. The starting price was such that immediate interest and offers within a day or two showed up. Every home has its magic price. If timing is everything and you don’t want to be sitting on that home in November, unsold and shopworn, find that number and run with it. What is the advantage of having your home on the market for 6 or 12 months when you likely will not get your asking price anyway? Remember the situation we are in today; over 90% of homes that sell had at least one price reduction during the listing period. One might say that price reduction is why it finally sold.

Does any of this make sense? I try to write in a conversational manner that I hope makes it easy to follow and comes across as logical. We can make this complicated or we can keep it simple. As we move into balance, be prepared to take action accordingly. A buyer maybe should act soon. A seller maybe should rethink their asking price if they want success this summer. Now that wasn’t too complicated, was it?

I am always ready to discuss your own real estate situation and goals with you. Knowing what is going on is of great importance. My strength is getting you through the negotiations and to the closing table feeling good about the process. Anyone can crunch numbers. Making sense of them can be a challenge.

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.