Welcome to the beginning of the recovery. This is what it looks like and this is how it feels. It is not all that wonderful or warm and fuzzy. Sorry about that. Many have said it will take us just as long to get back to normal (whatever that is) as it took us to get into such bad shape. That means many different things. The worldwide financial industry and economy might take a monstrous effort and 10 years to fix all or most of what is wrong. The costs will be enormous and affect everyone at some level. The village of Santa Fe might, a little sooner, recover some of the boom town mentality it used to thrive on. But do we really want the boom town to return? I submit that we maybe do not. We likely need to carve out a better, more equitable way to handle our community’s growth and unflagging demands on water supplies and other resources. Is it OK with you if we don’t ever get back to those crazy real estate growth days of 2002 thru 2006? Good, because we are still paying for those years, and it is now 2009. At least until we have collectively paid the price for our mutual mistakes of the past, we should not take on new goals we cannot fully support. That would be like us living beyond our means, and we know that is not a good long term plan.
There was a little glimmer of hope with the January 1st inventory (homes listed for sale in Santa Fe county), but it was short lived. Inventory went down in December but is up again in January. Those homes just took a short break from the market. You would be shocked at how many of today’s current listings include those that have been for sale for extended periods and with numerous Realtors. The amazing optimism of sellers might only be matched by those of us in the larger real estate industry. We want those sellers to sell almost as much as they do. Yet, there is not one fact I can locate that proves we are past the worst of it and on our way back to ‘good times’. But that shouldn’t prevent me or you from being optimistic about our chances. Some like to talk about the US government’s actions to jump start the economy. It is all over the news today. Part of that talk has to include the time it will take for the trickle down to reach the consumer. What do we do in the meantime? We don’t quit. We never give up. We keep striving to put deals together and hold on with all our might. And we hope our buyers can follow through with their contractual obligations! Please!
This month, there is a very important local matter that cannot possibly be discussed in too much depth. The ramifications are tremendous, and they are frightening. On March 10th, 2009, there is a special election planned for residents of the CITY of Santa Fe that are registered to vote. It is a single issue special election. The issue is whether or not Santa Fe should have a transfer tax, or a home tax or a mansion tax. It has a few names already. In brief, the City plans to collect a tax equal to 1% of the sales price above $750,000 of any home sold inside the City limits. It would be payable at the closing of that sale. This targets residential sales (homes), but family transfers would be exempt, I understand. Commercial property would be exempt. The City states that the tax will fund workforce housing at affordable prices in Santa Fe. The workforce housing is not defined in the proposal, but is generally understood to include police, fire, emergency, medical and teaching professionals. The concept is to keep as many of those workers as possible living in Santa Fe so their wages and their spending stays in Santa Fe and our local economy benefits. It is truly an admirable goal; but the problems with the concept are endless.
First and foremost, the threshold of $750,000 and the rate of 1% are just the starting point. In numerous if not most cities that have enacted and passed a home tax like the one on the ballot for Santa Fe, later on the threshold is lowered to include more homes sold at lower prices, and/or the percentage of 1 gets bumped up to 1 and a fraction or all the way to 2. No big deal? Please do the math. A $350,000 home, modestly priced in our fair city, might eventually require a tax to be paid of $500 or eventually as much as $7000. The lower number is 1% of the sales price above $300,000, a likely target threshold in the future. The larger amount is 2% of the entire sales price used in this example. This newsletter does not intend to spread false information about the proposed tax. It is written to warn those residents of the city of Santa Fe that the cost of housing may be going up. Is now a good time to institute a tax on sales of homes? I am having trouble seeing the logic and don’t understand the timing.
So you can vote IF you are registered and reside in the City. Please do vote and vote the way you see it. Turnout is all important in a special election like this one. The Real Estate Guide (on the newsstands right now) has an accurate rendering of what this mansion tax will mean to Santa Feans. It is in the February issue, on page 55, written by Melissa Pippin-Carson, a local Realtor I have a great deal of respect for. Please read it. Also, you can get more information by going to www.stopthehometaxnow.com or you can also visit www.sfar.com and select the Government Affairs menu item. You can even read the entire ordinance as it is proposed. You will see how loosely it is organized and that there are no specifics about control and management of the money. In addition, there is a tragic element in that the City proposes to have administrative expenses that might take up anywhere from 30 to 50% of the money gathered with this new tax. Are they just finding money for payroll and overhead or truly helping solve the issue of affordable housing? Those opposed to this tax are depicted as terrible and selfish people that are against affordable housing efforts. Nothing could be further from the truth. The Realtors, Home Builders and Remodelers, Chamber of Commerce members and countless others strongly oppose this tax and still do a great deal to support affordable housing efforts. This is a much larger issue than it first seems. I’ll leave it to you to figure out which side to come down on. Or take my advice and vote against the tax.
Did I mention that you can vote early (beginning February 11th) at the City Clerk’s office at City Hall. Bring your ID and your voter registration.
We got a little off track, but for a meaningful purpose. Now back to the real estate market and its faint pulse… Much of what so many waited for has now happened or is in the process of happening. The presidential campaign, the election, the new year… So just exactly when do buyers start writing earnest money checks and showing up at the closing table? Well, they need the money, or a combination of their money and loan money, and the loan money may be getting cheaper soon. They need a reason. Maybe they have outgrown the home they are in, or they see a bargain they can’t live without. They probably will want professional assistance, but there is no shortage there. Some 850 Realtors renewed their annual dues to the Santa Fe Association of Realtors.
How about the inventory? With well over a year’s worth of homes on the market, do you think price has anything to do with how fast a home will sell? If a seller has a home listed for one year, and 37 other homes have sold in that same general price range and/or that same quadrant of the city, why hasn’t that one home sold for that one seller? Start with the price. Then you have to examine the condition and the appearance (curb appeal) of the home. But if you can’t get past the price, it doesn’t matter how pretty it is. It won’t sell until it is priced correctly. And that could be defined as being in the lowest 15% of the price range for similar homes in similar settings. The real estate professional you work with will show you what has sold. We do have a pulse here; it’s just faint. There really are sales. See the attached chart for confirmation. So again, how does my home get into the sold column? Maybe furnish it with some really nice stuff. And make it look like a model home (even if someone like you lives there). Pets are fun, but they should not be interacting with a buyer looking at a home. No, you don’t have to get rid of your pet. Just compensate by changing the price. Does the buyer have pets? You almost never get the answer to that question before they see the home.
Once the inventory comes into balance, such as a 6 to 8 month supply, (6 is better than 8) then we can all pop the cork on the champagne and celebrate the midpoint of that recovery we just started into. It’s the journey that will be so interesting. Get your bargain while you can.