According to the National Association of Realtors, nationally September marked the fourth consecutive month of rising home sales and with a 9.7% increase over last month in single family home sales, an astonishing increase of 20% in sales over last year at this time. With interest rates at record lows, NAR’s chief economist, Lawrence Yun feels the plentitude of buyers shifting to work at home are taking advantage of more purchasing power. On their hit list includes vacation homes and larger homes with more flex and office space as well as room for families to weather this new paradigm shift of home-centricity.
The median sales price on the national level is up almost 15% from last year to $311,800. Across the country the housing shortage is causing higher prices and while new construction starts are at their highest since before the great recession, the housing demand will continue to fuel an atypical selling season. Going into the fourth quarter, a time where fewer homes are offered for sale and further acerbated by cautious home sellers still reluctant to put their homes on the market, the 4th quarter numbers will be likely more of the same.
Here in Santa Fe, we too are experiencing a Zoom Boom. Supported by statistics published by our Santa Fe Association of Realtors for the third quarter, our median sales price over last year rose almost 20% to a staggering $536,995. This unfortunately means that our housing affordability index has sunk to an all-time low at 55%. Which means that the median household income in Santa Fe is only 55% of the required income needed to qualify for the median priced home at current interest rates. This trend of affordability is one that is going to haunt us as we grapple with soaring home prices.
On the opposite side of the spectrum, NAR reports that sales of million dollar homes have more than doubled this year over last. We are seeing this trend here in Santa Fe as the luxury real estate market is booming and inventory levels above a million at less than nine months overall. However, if you dial that in by neighborhoods, the market becomes even tighter with quality inventory. In previous years, a three-million-dollar home might be on the market for over two years. In this new market, homes priced above $2,000,000 are selling quick, sometimes within days of the arriving on the market.
As of October 1st, the total inventory of residential homes for sale in Santa Fe and the surrounding county was 437. Our days on market continues to fall with the available inventory and now sits at 53 days, a 12% decrease over last year at this time. With only two months of inventory in our local market, it is not surprising to see that multiple offers and bidding wars are all too common. The right priced home in the right neighborhood can expect to sell within days and more and more buyers are having to drop everything to get into a new listing within the first 24 hours of arriving on the market.
New construction is booming around Santa Fe and that will certainly aid in our inventory crisis. However, due to the pandemic building times have increased from 4 to 6 months to almost a year as shortages that included everything from lumber and concrete to refrigerators impacts timelines. The construction boom and the real estate industry with all its ancillary jobs has helped foster up an economy that is still under attack with the surging virus. Despite shutdowns and record unemployment, this huge market sector is experiencing a veritable gold rush that is the underpinning of any complete recovery of our economy. The biggest question we get is how long will it last?
Chief economist Yun believes that the record low interest rates will remain low for the foreseeable future, maybe well into 2021. The nationwide shortage of homes for sale will continue to cause spikes in home prices however the ability to purchase will taper as homes become too expensive for average home buyers. Already, first time home buyers are losing ground in their purchasing power. For last month, they represented only 31% of buyers while in normal years, that number should be 35 to 40%. The disparity in equity between homeowners and renters is well documented. While homeowners can enjoy the growth in their equity and wealth, those who desire to become homeowners will be frustrated by lack of affordability. We need to find balance in this nation to prevent more of the have and have not scenarios. We want our children to experience the American dream of home ownership and we need to strive for the balance in our nation.