|
Market's low ? except up high
(Santa Fe New Mexican, The (KRT) Via Thomson Dialog NewsEdge) Mar. 23--The oft-repeated wisdom is that the Santa Fe real-estate market is largely immune to shifts experienced by most everyone else in the United States. Santa Fe's climate, art market and unique cultural character draw people from everywhere, unrelentingly, and that constant influx translates into pretty steady sales of homes as visitors become residents.
However, the Santa Fe market is depressed, and it has been for eight or nine months, according to Santa Fe Association of Realtors president Baro Shalizi. A number of elements have conspired to create a perfect storm -- otherwise known as a buyer's market. One is the tightened mortgage-qualification standards, and general anxiety, stimulated by last year's crisis of subprime-mortgage defaults.
It is a buyer's market -- the Santa Fe affiliate of Sotheby's International Realty admitted this in its third-quarter State of the Market report last October. There is lots of inventory (homes on the market), so the buyer is taking his time. He may be nervous because of all the national publicity about "the housing slump." He may be stalled on his Santa Fe purchase because the home in New York or Chicago isn't selling. Or he may simply be having trouble qualifying for a mortgage.
Add the stubborness of the seller who won't bring down his asking price and you have a stalled market.
The number of homes sold during the second half of 2007 was down in all eight quadrants of the city and county from 2006 levels. The biggest change was a 55 percent drop in the southeast-city area.
The natural reaction to fewer sales -- lowering prices -- was subverted in four of the quadrants. Although the fourth-quarter median price for 2007 was down 48 percent in the north-county area, it was 22 percent higher than fourth-quarter 2006 in the northwest county, for example.
"That's primarily because upper-end homes were not impacted as much by the subprime problem," Shalizi said. The latest median price for the northwest-county area was $910,000.
The biggest impact of the current downturn has been felt in the lower and middle sections of the marketplace, where buyers spend between $185,000 and $750,000.
"Tightened mortgage lending standards have kept more buyers on the sidelines, but given that the 100 percent loans to borrowers with weak credit created most of the problems in recent years, a more stringent lending process is welcomed," say Sotheby's Alan Ball and Darci Burson in the State of the Market Report for fourth-quarter 2007. "We expect to have fewer buyers to work with than our sellers would want, but they likely will be prequalified and able to afford the home they hope to purchase."
The report says that the overall median home price for 2007 was $406,500, up 20 percent from 2006; and the 2007 average price was $529,930, up 11 percent. The authors of the Sotheby's report state that the decrease in the number of sales in the lower price ranges (probably due to tightened mortgage-loan standards) has propped up both price averages and medians.
Another point to consider: One reason the average home price for 2007 was 30 percent higher than the median is that the high number of sales (162) of homes priced at more than $1 million skews the average upward.
Sotheby's also says that of the actual decrease of 650 homes in 2007 unit sales, compared to the year before, 636 were at $750,000 and below. "From our experience, buyers in that wide price range are more readily seeking mortgage financing and now finding it harder to get, and this likely accounts for some of the decrease."
What people are saying
Shalizi, the head of the local Realtors' association, observed that the Santa Fe market has experienced a downturn, but not nearly as bad as seen in most of the rest of the U.S. "We're the fifth lowest in the country in foreclosures," he said. "The National Association of Home Builders recently stated that as a buy, New Mexico is still number one because our markets didn't go up dramatically or come down dramatically.
"My feeling is that the market here will remain somewhat flat this year, but I am seeing a lot of sellers coming to terms with the market and adjusting their prices."
Shalizi commented on the historically low interest rates at present, and the fact that the ceiling for jumbo loans is being raised substantially from the previous threshold of $417,000. This temporarily adjustment (for the remainder of 2008) means buyers can qualify for higher-priced loans at the lower, conforming-loan, interest rate. This is a significant advantage in the Santa Fe area, where the most recent median-price figure was $433,500, according to the Santa Fe Association of Realtors.
Realtor Vee Bybee partners with her daughter, Lisa Bybee, at Santa Fe Properties. "We're holding on," she said. "Santa Fe still remains a destination, but there are a lot of homes on the market."
During a recent open house, Bybee said, "Lisa had like 17 groups look at a listing in Nava Ade and I had eight at a listing in the northwest part of town. It is picking up.
"Up until recently we were representing the final phase at the Nava Ade subdivision and we did quite well once they came down in price. You have to be realistic, whether you're a developer or the owner of a private home."
Realtor Renee Edwards, Prestige Properties, agrees. "We like to encourage sellers to adjust their prices. Buyers are looking for value and what I'm finding is that they're looking a lot and waiting to see if prices are going to drop," she said.
Edwards believes the Santa Fe market will get back to normal in the months ahead. "It is slow, there's no doubt about it, but the weather's warming up. It's been a cold January and that didn't help, but I'm optimistic about 2008."
Architect Bob Zachry specializes in contemporary homes. Such properties have a more limited audience and those buyers tend to have good financial profiles, but he's still feeling the crunch.
"I've found some of the potential clients from other countries who have been leaning toward the States to build new homes, especially contemporary homes, are even nervous. It's pretty severe," he said. "I thought I was the only one until I went to the AIA (American Institute of Architects-Santa Fe) meeting a few weeks ago and numerous people were talking about how slow business is, particularly the larger offices in town."
Zachry has a sense that the "optimism connected with this presidential election" will help reverse the housing doldrums.
Santa Fe Community Housing Trust sales manager Jim Hannan said most of the affordable housing in Santa Fe today comes up as a result of the Santa Fe Homes Program, the 2006 city ordinance that requires developers to sell 30 percent of their homes at affordable prices.
Sales are a little slower for the Housing Trust. "Because of the city ordinance, a lot of what we do is driven by market-rate stuff and I think a lot of developers are sitting on their hands, waiting to see what will happen," Hannan said.
Wayne Miller, president of the Santa Fe Community Housing Trust board of directors and senior vice president of commercial and mortgage lending at Charter Bank, places part of the blame for the continuing real-estate slump on negative coverage by the media. It is too easy for people to misunderstand that national news doesn't necessarily apply to New Mexico.
"I've been to two very large servicers of mortgages, Countrywide and Fannie Mae, and I will tell you that Fannie Mae has a total of 28 or 29 homes that have been foreclosed in the state of New Mexico," he said. "Countrywide has a grand total of eight. So you take 34 foreclosures for a state this large ... We're not experiencing any of the issues the rest of the country has."
Builder Joel Muller, Tent Rock Inc., said business is good. "We're doing some remodels and some larger homes over $1 million. I think both those categories don't seem to be affected by the downturn."
Are spec homes dangerous right now? Builders can't afford to have completed houses sitting unsold for months. "I have just one going," Muller said. "It's contemporary, and from what Realtors are telling me, that's not a bad place to be."
Regarding the low- and mid-range market, he said, "I know interest rates are low, so that's not the issue. My take is that they're a little oversaturated with inventory."
Mike Sabik with Centex Homes said the company is being more conservative about construction. "We're just not building any inventory homes, spec homes," he said. "With the year we've had, cancellations of course have been a challenge for us, so when we do get cancels, we use those as our inventory or spec homes."
Cancellations happen when people order houses but are forced to pull out midstream when they are unable to sell their current properties and can't qualify for loans.
Centex Homes, a Dallas-based company, is building houses priced from $185,000 to $350,000 in three projects in Santa Fe. Centex recently lowered its base prices, and Sabik said the market seems to have picked up.
"I'm an eternal optimist and I think we'll see things start to come back in 2008," he said. "I still believe it will be a tough year, but if you are wanting to buy now, and you're able to buy, our base prices are at or below what they were when we first started here six years ago, and interest rates are fabulous."
Actually, all of the builders could take a rest for a while. According to the Sotheby's State of the Market report, released on Jan. 8, the current inventory of homes on the market totals 1,845. (This includes 322 priced above $1 million.) That figure, 1,845 houses, is nearly twice the inventory level averaged over the previous seven years. It is also greater than the number of homes sold in 2007. In other words, there likely are enough completed homes for sale right now to satisfy the market for more than a year.
This article originally appeared in the March 2008 edition of the Santa Fe Real Estate Guide.Contact Paul Weideman at 986-3043 or pweideman@sfnewmexican.com
To see more of The Santa Fe New Mexican, or to subscribe to the newspaper, go to http://www.santafenewmexican.com/.
Copyright (c) 2008, The Santa Fe New Mexican
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
[ Back To TMCnet.com's Homepage ]
|
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.
