We have seen many things in our lives, but is anyone saying they have ever seen anything like this? Now and then we learn of someone on the far side of 100 who remembers a great-great-uncle who fought in the Civil War, but who of us can truthfully say we have ever seen such unusual times? I was just given a recently transcribed conversation of my father’s mother’s conversation with a teenager as she recalled what life was like in the days long ago. The conversation was during the late 1960s. My grandmother used a phrase that must have been her name for those times: “hard times”, and it was used repeatedly during the interview. “It was during the hard times…” and “We had hard times…” and “…at that time there were hard times everywhere…” (a few examples). Maybe that was everyone’s name for those times. What will we call these times? When we are deeply tired and living out our days, what will we remember of today? Will we remember the titans of industry that owned a private jet or the ones that provide care and shelter to the needy? Will we recall the out-of-control spending on luxury items or the time we got 50% off that favorite pair of shoes? I suspect we will recall those that spoke truth to power and those that did not follow fashion for the sake of impressing their friends.
How you remember may depend on how you are living today. If you are gainfully employed and have income, living within your means, you will likely have different memories of today than if you are unemployed, or underemployed, or not even able to pay the necessary bills coming due. You do know of someone that is gradually falling apart financially and will not be able to avoid bankruptcy and the embarrassment of personal failure. They may be holding their head high now; acting strong and behaving as if all is well, but once they get home and the mask comes off, how do you think they feel knowing that things may get even worse? There are various popular songs (and many books and stories with the same theme) about how ironic it is that you get to know some people on your way “up” and then find yourself seeing them again on your way “down”. Is there comfort in knowing that you were fair and honest in your dealings with them before, while you were on top? Now you hope they treat you the same way, since they are now making decisions that affect your life and future. Or were you less than fair and honest with that person that now has the power to guide your employment application, or your loan application, or your housing application, or your food stamps application? Why does this matter to us today? Do you think we should try to forget our past or just hope that someone else forgets our past? Are we looking behind us or looking ahead? Let’s plan on having no regrets.
Some are grumbling about how this newsletter contains only negative information and doesn’t allow the bright side to show. What should you be reading here? …that all is well and getting better; that we are done with suffering and pain. Really? My plan is to state facts and stats as I find them, and express the occasional observation that, to me, illustrates what seems to be going on. I was always taught the best information allows one to make the best decisions. Agree or not, or write me back with other ideas. You certainly may unsubscribe if you prefer. Just let me know. Or you could write your own newsletter. Stating how things are getting better. There is a waiting list for that kind of news. Many seem to think things are “OK” here. Tell us what things. I hope your personal experience is positive. Feel free to share.
Let’s see if the subject of this newsletter gives us any reason to feel better. That would be residential sales statistics for Santa Fe (city and county) in New Mexico. First, please see the attached spreadsheet for an ongoing study of the Absorption Rate for homes listed for sale in Santa Fe. Compare the April 09 numbers and percentages with April 08. Compare any of the rows in any sequence you care to. Go back to the end of 2006 for a glimpse of what sales were like in “good” times. We remember those, don’t we? Inventory of homes listed for sale has gone up about 33% since the end of 2006, while sales (monthly rolling average) have dropped by about 50%. That’s a very broad look at the entire market. Yet it’s so much more complex than that. Different price points and various neighborhoods will give widely varied results. The saying that all real estate is local still holds true. When the average sold price of a home in Detroit, Michigan is below $20,000, how can we stand here and say that our “for sale” housing is priced right? What level of pricing is right? And right for whom? There is a phrase tossed around lately that has a catchy sound. People are trying to tell us that what we are experiencing today is the “new normal”.
Typically, this newsletter has its eye on Santa Fe housing listed for sale and recently sold. This month, I am adding statistical comparisons of residential land sales in Santa Fe (city and county). These figures reflect an even larger slide than housing stats. In the first four months of 2009, there were 30 residential lot sales in Santa Fe city and county. In 2008, again, same four month period for each subsequent year, the total was 53. For 2007 it was 162. For 2006 it was 201. For 2005 it was 161. For 2004 it was 183. For 2003 it was 178. For 2002 it was 168. For the seven years before 2009, the first one third of the year had, on average, 158 sales of residential lots in Santa Fe county. With 2009’s total at 30, that would calculate to less than one fifth of the previous seven years average. That is a reduction of over 80%, although only down a little less than 50% from 2008 to 2009. These are reported sales in the Santa Fe Association of Realtors Multiple Listing Service. What are we seeing in these numbers? Is this the new normal? We are seeing uncertainty among homeowners making longer term plans to buy land and then build. The average sales price for residential lots has ranged from a low of $141,740 in 2003 to a high of $251,850 in 2008. What happens if you take away the economic engine of 100 lot sales disappearing from the official tally, at an average sales price of $200,000? You would start with the missing sales commissions, title insurance, surveys, gross receipts taxes and other related costs. Then you would have to take into account the money the wanting sellers didn’t get to collect. That’s at least 20 million dollars in the last four months alone. What would that amount of money, circulating in Santa Fe, have done to boost our area economy?
The attached spreadsheet is very useful if you are a seller hoping to sell. Take your personal financial situation and plug it into the length of time it will take to sell all inventory in your price range. Then decide if you want to be in the first 10-15% of homes that will sell, or mired somewhere in the middle, or worse to worst, lagging the entire market. Once you pick your poison, you are almost finished setting a price for your home. If you price it low enough, you don’t even have to clean it up or make it look warm and cozy. Someone might be so focused on price they overlook the sorry condition, if it’s priced right. What does the information in the newsletter mean for the prospective buyer? It means you can find a great deal if you are willing to look at lots of homes and ask lots of questions. If our area market has an approximate supply of 20 months of inventory, what incentive does a buyer have to offer anywhere near asking price? Someone please educate me on how we can get rid of an excess of inventory without lowering prices. How else are we going to liquidate this inventory? Certainly some will arrange for a long term tenant, while other homes may sit idle and vacant, waiting for the first sign of a roof leak, vandalism or pest invasion. Then those homes will be worth even less because of the wear and tear and deterioration that is inevitable. Have you ever known a tenant to maintain a house as well as a homeowner? And have you ever known of a flat roof that refuses to leak?
Home prices need to come down further. Is that clear? If they do not, we will not be able to make the journey forward to a balanced buy/sell market and fair negotiating. If you do not have to sell now, please take your home off the market so the rest of us can browse those that must sell soon. If you can’t afford to wait, go ahead and list, and please price it to sell so you can get the pain behind you and move on. I’m on your side.
Where are we? Are we past the worst? Have we hit bottom and now can only go up? I have a personal belief that we are injured veterans of the bottom by now, but I also suspect that the climb out will be long and exhausting and some will not make it all the way back. We can say we saw it and looked it in the eye and we didn’t blink. Maybe its time to stop trying to predict and just plain time to cope and get along and make do. You know what I am saying. Who among you has not increased your personal nest egg and set aside more just in case you need it? The evidence is in. One can easily verify that saving money is the new king (remember when you first heard the phrase Cash Is King?). OR just look at yourself. What is “King” now might be making sure you are provided for and your loved ones are cared for, safe and warm. We don’t hear much bragging these days. It’s a more careful or thoughtful tone when people speak of how they are doing.
OK, enough already. Someone is crying Uncle! And others are losing interest in this rant about something as meaningless as Santa Fe real estate. So I’ll close up shop for another month and watch and wait for the drought to end. Yes, we can expect improvement someday, and we do whatever we can to make it happen. Where do you want to start?