Pushing uphill

We cannot just roll along but must push uphill in order to get into a home or to help a purchaser buy. The lack of inventory is scary and sales would see even higher numbers if more product were available to buy. New highs were set again last month: most sales above $1 million in any 12 month time frame, most sales between $500K and $1 million in any 12 month time frame, fastest average absorption rate for under $500K in our 15 plus years of tracking, etc.

The spreadsheets and charts here tell the story. We have a red hot market here and that is saying something after more than 10 years of recovery from the cliff we all sailed over in 2007 and 2008. Some markets recovered more quickly, mostly those with strong employment trends or legal marijuana such as areas of Colorado. Santa Fe does not have either of those factors (I cannot include service industry jobs at below living wage pay rates), but we do have Meow Wolf. It has been responsible for more economic growth than any single other thing that has taken place in the last 10 years. What can compare? The expansion of St. Vincent Hospital? New casino buildings?

The fact that Santa Fe was always a major art center helped a new venture like Meow Wolf succeed, we suppose. but maybe it was unique and original enough that it would have taken off no matter where it was located. But not Los Alamos or Las Vegas NM. And not Taos or Raton. Look at the value of Meow Wolf stock since it was first issued. Nothing like that exists in Santa Fe New Mexico.

Should we lament the crazy hot market conditions? Maybe yes if you are looking to buy as your options are severely limited. Sellers should be happy. If they are not happy they might have the wrong Realtor because if anything is true to day in the residential real estate market in Santa Fe, there is certainly a buyer for every house listed for sale. Personally a more balanced market can favor more people overall, providing a level ground for all to stand on. But markets are constantly changing. There is no perfect real estate market as it turns out.

Thank you for following along with my reporting about the City Different. We may lack some road crews fixing our potholes and repainting stripes, but we have plenty of people wanting to live here. We may lack transparency in government and social services, but if you can afford it, you can get almost anything you want here. We might not have enough opportunity for our young people to stay here after leaving school, but we have plenty of old folks that need medical attention and help with their computers. Can’t find a job? There are jobs; food service, retail, personal assistance to those in need. Sad though they might not be what you want.

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!

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)

This was the year we got healthy

That header is not a new year’s resolution, but a market condition statement, saying we “got healthy” in terms of numbers of sold homes and the ever decreasing inventory…So we are supposedly healthy now? We have made up nearly all of the ground lost over the last 10 years and it feels like we are starting over now. Consistently we are seeing home sales per month in excess of 200 units. The grand total dollar sales for the year will easily exceed 1 billion, which has not happened in over 12 years.

Everyone is talking about how low inventory is. In case it’s not clear to you what that means, it means sellers might have the confidence to wait for the right buyer knowing those buyers have fewer homes to choose from. It does not mean that the junk, the extremely dated (can you say mid-century modern?) and the horrible floor plans will all of a sudden start selling. You still have to compete with clean and tasteful product to get a home sold. It might mean more buyers will have to settle for a home they can remodel to suit their needs if they can’t find one they really like as is.

Take some time to review the year-end statistics when they are posted by yours truly about January 10th and you will see unit sales growth in excess of 12% from 2016 to 2017. You will see an increase is sales count in each and every price range (unless it’s the lowest which is held back by that same lack of inventory). You will see Absorption Rates at their lowest (average months to sell all available inventory) in many years.

It is time to send out your thank you cards and start by sending one to each of your customers and to each of your fellow professionals that helped you succeed. And then plan for an even better year next year. I am going to take a bit of time off to travel so the blog posts will be strictly updates on statistics over the next couple months (each month about the 10th) and not so much trend analysis or political musing. You can get that anywhere from almost anyone.

People say a salesperson should not take sides in a political debate so as not to offend or run off the customers that disagree with them. But I tell you a guy that is 67 that is going to remain silent about what is going on in the world today is not someone I would respect anyway. So if you want to hear what I have to say about current events, stick around. You will get more than a lump of coal.

Thank you for your support and encouragement over the years. It is certainly nice to be able to report on positive trends and increasingly healthy sales results in our special market. Who knows, we might see more pastureland turned into ranchitos and mcmansions in the future. We might see a stronger backbone for city infill by the powers that determine who gets water and sewer hookups at what price. Everyone loves open space, but if its weeds and some junk autos and blowing trash, is that the highest and best use by some definition?

Happy new year and best wishes for a prosperous 2018.

JUST LOOK

Just look at these numbers!  We have not seen numbers like this in well over 10 years. The unit sales are up and as we approach the end of the year I believe everything will be up over last year and actually over any other year in the last 10. Granted we are wrapping up the busiest season and some economic signs are very positive these days (do you own some of the big tech stocks?)

Go anywhere in the “pages” section of this blog, where the reports you may want to look at are available on the left margin. Compare the last 12 months with any other recent period and be prepared to let out a cheer. I feel as if the wicked witch is dead.

Things are good enough that we are getting into dangerous territory in the lowest price ranges. The length of time on the market for a home under $300K is well below 6 months, meaning sellers are getting away with selling quickly without as much caution on the buyers side. Many other price ranges are healthy and certain neighborhoods are thriving, but why not? It is about damn time, right?

Enjoy the reports and get ready for a rocking and rolling 2018!!

Thanks

Absorption Rate – Defined

Throughout this website and blog, the words Absorption Rate show up, in texts of posts and as titles of four unique and dynamic reports available to you anytime you visit here.

What is Absorption Rate and how is it calculated? And what does it mean?

I am glad you asked!  Absorption Rate is a calculation based on sales of homes and inventory of available homes listed for sale. First, I use only data available in the Santa Fe Association of Realtors that is managed through a proprietary program known as Paragon.

Every month I research the inventory of homes listed for sale. This number (in various price ranges) is saved and I have approximately a 15 year history of those numbers from every month. Next I determine how many sales were reported for the most recent 12 month period. This would be a rolling 12 month count that is updated monthly. The newest month is added and the oldest month drops off. Make sense so far?

Then I come up with an average number of homes that sold in the prior 12 months. That number is then used to calculate how many months it will take for all currently listed inventory to sell based on how many sell, on average, each month.

What is means is: if the Absorption Rate in a price range is longer than 6 to 8 months, any real estate expert will likely tell you that it is a buyer’s market and that buyers have plenty of inventory to look at while shopping. This is a disadvantage to sellers as they are competing with many other homes and theirs must stand out in order to be selected and purchased. Price is usually the # 1 factor for a buyer, but condition is very important as is location.

The higher price ranges in our market area tend to be buyer’s markets. The lowest price ranges tend to be seller’s markets, where the seller can expect to get favorable (to them) offers and terms.

Look at any of the spreadsheets and charts available here and you can see how trend lines and seasonal fluctuations show up. Lately inventory is up and sales are down. Take a look when you have time.

Thanks

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.