June 2010

Hits: 10

First of all, please stop reading the papers or listening to the economic experts. Take 2 of these and you’ll feel better in the morning. Just today a radio news reporter told of the latest RealtyTrac report that had both good news and bad news. And that’s a brief summary of where we are right now; good and bad, positive and negative, yin and yang, up and down. Last week, an economist from Goldman Sachs predicted about a 3 % dip in home prices nationally over the next year. Each market has its own issues, but Santa Fe will see some fallout from the hardest hit areas, such as Las Vegas and Phoenix. We could have a stable local market and still suffer.

As the year progresses, what seemed like a nice tidy finish to the economic mess of the last few years is now going rogue. From the many economists, financial advisors and talking heads one can hear a change in tone that is not encouraging. It relates to the two types of recovery that have been discussed for the last year. Many believed we had a V shaped downturn; we already hit the bottom (and hit it hard) and are now on the way up, with the past a painful memory. Others thought we’d have a W shaped recovery; a bottom followed by a false recovery followed by another bottom, leading to an eventual recovery. In the V scenario, we could say we are past the worst and headed for the land of prosperity. Yet in the W scenario, we are only hanging near the peak, between the two bottoms, with more difficulties ahead.

No, sorry, I really don’t know what we have here and I won’t guess, but the prediction of another bottom is terrifying. Will anyone be left kicking if we have to survive another downturn as in the W shaped scenario? Maybe we should just focus on our health and our families and find a nice cozy place to live and plan on working for a long long time. You have to live somewhere, correct? It may not be a gilded palace or the statement home you might prefer, but you have to call someplace home. And if you have your health and your family around, you can support each other while finding new ways to be thrifty and still have some fun.

The shadow inventory mentioned in previous newsletters is mostly unchanged. The key thing to watch is how mortgage lenders work out problem loans with borrowers that are now unemployed or making a fraction of what they used to earn. We hear all around that the American worker has greatly increased productivity in the last couple years. We have also added the discipline of saving money (if possible) to create a buffer, just in case that ‘worst case scenario’ pops up. If you are in a mortgaged home with a loan balance higher than the value, what do you do? You could stay there and write a check each month or you could move along without selling and live with the consequences. (This is not the advice column on how to abandon a property without destroying your credit – others can tell you that) I hope, for the sake of us all, those that like or love their homes can hold on and keep paying while their home gradually regains value and “equity” makes a return appearance. How many years? I don’t know. This is the painful part of the lesson we learned; that our homes are not ATM machines. They are to live in, fix up, maintain, landscape, enjoy, entertain in and be proud of.  They can be good investments too, but that would be a stroke of luck, to make money selling your home. And what is selling? Answer: homes that are perfectly decorated, uncluttered, with no defects or problems, priced aggressively. Your professional Realtor could find you one today.

In the mix of numbers on the attached Absorption Rate study, there are some bright spots. Our rate of annual sales has picked up from this time last year. When I am asked if I see any improvement in the market, my answer is yes, but a hesitant yes because we HAD TO improve over last year. We are seeing improvement; every month adds to our base for future sales and eventually shores up prices. Inventory is up as expected; still the Numero Uno issue, too much inventory. But one number you can brag about is the last 12 months of sales totals exceeded 1300 for the first time in 17 months. Bear with me, it’s a moving target. At month end, I tabulate the previous 12 months of sales totals. It was 12-31-08 when we last had this many sales for the previous year, using the entire price spectrum. In the $500K and under range, it was 9-30-08 since we last could count this high. That doesn’t mean you can take a day off, sorry. Now with a bit of momentum, maybe we can move the numbers still higher this year.

Months ago, I suggested you wait until at least mid-summer before declaring this a true recovery year or a flat (or worse) year. That’s only a few more months, so if you want to skip this newsletter until August 10th, tune in then and see if there is a new trend. And I can’t stand the suspense! Yes, I will send again in July for those who can’t wait!   Thank you for everything!

Posted in Posts & Updates, Santa Fe area real estate.

The writer is a 68 year-old young man engaged as an active REALTOR (associate broker) with Keller Williams, in real estate sales and management in the Santa Fe NM market area. My career has been in and around the real estate industry for more than 35 years, ranging from mortgage lending (interim, commercial, residential); residential property management and leasing; shopping center development and leasing; real estate sales; sales training; title insurance as an executive and an escrow officer; various management positions; consulting and other related activities. That plus a bunch of banking experience including our family-owned Bank of Santa Fe in the 1980s. Where has the time gone?
My background means you have my working knowledge of the entire transaction process at your disposal. That comes with honesty and no bullshit.