Santa Fe Market Report – Spring 2010
As I have reported in recent newsletters, current news and expert predictions on the housing market continue to be a mixed bag of optimism and concern. How closely Santa Fe tracks with national trends remains a critical question that will be answered in the months ahead. As of now, much like on the national front, Santa Fe residential real estate is a mixed bag of results and expectations.
Let’s start with the big picture. Markets around the country are definitely healing as measured by increased sales and dropping inventories of available properties. Interest rates remain very attractive but there is concern about how rates will be impacted when the Federal Reserve ceases their $1.25 trillion purchases of mortgage-backed securities, which will happen at the end of this month. Predictions about rate increases are generally between a quarter of one percent to as much as a full percentage point. It will be interesting to watch the results as the market takes over from the government stimulus.
The phrase “double dip” is now (unfortunately) uttered regularly by “industry experts”. Fueled by more foreclosures and short sales, some of the leading economists are predicting home prices will again fall before values stabilize. A 4% to 10% drop in values nationally seems to be the general expectation among those who think we haven’t yet found the bottom.
Another view of the market that is getting a lot of recent play is the number of homes that “are underwater”……..those properties where the loan balances are greater than the value of the homes that secure the debt. The most recent estimate is more than 11.3 million residential properties with debt against them, or 24%, have negative equity as of the end of the 4th quarter of 2009. This is an increase from 10.7 million, or 23%, as of the 3rd quarter of 2009.
Now to Santa Fe. We have seen a dramatic increase in the number of sales since January 1st, as compared to the same time frame last year. Not terribly surprising, when you recall what was happening during the first quarter of 2009. Those were dark days indeed. The increases by market segment are sizable and encouraging as this year’s spring market gets underway. In the under $500,000 market, the number of sales is up 51% from a year ago. Sales in the $500,000 – $1,000,000 are up 23% and sales between $1,000,000 and $2,000,000 are up 30%. So far the market has only had one sale above $2,000,000 and it was my Team’s sale and it closed in mid-March. That segment of the market remains very hard-hit, much like last year.
Another significant indicator we’re watching is the number of buyers who are actively looking at properties. With this information giving us an insight into future sales activity, Sotheby’s International Realty tracks the number of showings of the entire company inventory of listed properties on a daily basis, allowing us to see important trends. In the past 10 days, the 10 properties that have seen the greatest showing activity range in price from $175,000 to $759,000. Also, surprisingly, showing activity for January and February of this year was down from the showing activity during the same months last year. This was unexpected and in contrast to the gains we’ve seen in sales this year. The disappointing number of showings could lead us to conclude that sales in the months ahead will be negatively impacted. We do not expect this will be the case. We are clearly seeing more committed buyers in the market, even if there are fewer of them than we expect.
Forbes’ just-published list of the cities recovering most quickly caught my eye, given that 4 of the 10 cities making this important list are in Texas (#2 Austin, #3 Dallas, #4 Houston & #7 San Antonio). Given that a very significant share of our higher-end buyers come from Texas, this may prove to be important to our market in the months ahead.
So what will happen in the next few months? Buyers, in increasing numbers, will come to Santa Fe. They will have concerns about the overall economy and they will be armed with the cautionary news that we’ll continue to hear. At the same time, they will be impressed by many of the very well-priced and wonderful homes that are available and prompted to act as more favorable news continues to surface. Many sellers, anticipating a window of opportunity to sell in the months ahead but remaining concerned about the ample competition, will continue to uncomfortably re-evaluate their asking prices to do what is necessary to make their properties attractive to those who are buying. There will continue to be a natural gap between what sellers want and what buyers are willing to pay, but we’ll see more parties reaching agreement than we have in past months. The increased sales activity will be significant.
With my team breaking into the Top 50 Teams for all of NRT (the largest real estate company in America, the owner of Sotheby’s International Realty and other top real estate companies that are well known and highly regarded, staffed with over 46,000 brokers/agents) we are very proud of our accomplishments yet remain very mindful of the challenges ahead. We are optimistic about Santa Fe and the stability that the market will gain in the months ahead.
Thanks for taking the time to read this installment of the Market Briefing. We hope you find this issue informative and interesting.
Neil D. Lyon, CRB, CRS, GRI
Santa Fe’s 2001 Realtor of the Year
NOTES: The YTD sales statistics cited are from the Santa Fe Multiple Listing Service (MLS) and reflect residential home sales in Santa Fe County.