State of the Market
Santa Fe, NM – 2nd Quarter 2008
In a message intended to recount our past and current market conditions as well as anticipate the future, I would first like to thank our customers and clientele for being exceedingly patient while we try to make sense of a time of change in our current real estate conditions. While the “real estate” question remains a popular source of conversation through out Santa Fe, presenting our market in a nice, neat package remains challenging. There are some segments of our local market that have slipped drastically, while our statistics show that other segments continue to thrive.
Home buyers continue to be in the driver’s seat with plenty of inventory to choose from in virtually all price ranges. Time required to sell a listing has lengthened to an average of 183 days on the market. Home prices appear to have stabilized based on our supply and demand not to mention, sellers are becoming more realistic in their pricing. As a result, our sellers are averaging 93% of asking prices.
We continue to deal with several challenging factors in the national and local markets. Concern over liquidity and tougher lending qualifying standards in the mortgage industry is slowing any quick recovery. Lingering problems with sub prime loans must also be resolved as our industry wades through an increasing number of short sales and foreclosures.
We also continue to be challenged by the constant barrage of negative media attention regarding the state of the real estate market. What is frustrating about much of this negative news is that many of the market fundamentals remain positive. Interest rates are at historically low levels. Employment is adjusting but still at roughly 95%. The prime component of a healthy real estate market…confidence, remains relatively strong. According to a consumer research study recently undertaken by Architectural Digest and Sotheby’s International Realty, real estate is still considered a sound investment and affluent consumers are confident both in the current housing market and that the value of their home has remained constant. In the survey, “Seeking an Extraordinary Lifestyle”, 85% of the respondents agreed with the statement, “I think real estate continues to be one of the best investment a person can make.” The study also revealed that 55% of the million dollar homeowners that responded to the survey plan to buy, sell, build or invest in a new home. 69% of the respondents agreed that now is a good time to add to one’s real estate holdings. The respondents felt that the media plays a role in the perception of the current real estate conditions. 50% of the respondents think the media exaggerates the market conditions to make it seem worse than it really is.
So, let’s get back to that burning “real estate” question in Santa Fe. Our overall market is certainly not at the level it was at the end of second quarter of last year, and this is to be expected when we consider the challenges that we face as well as the current state of the overall economy in 2008. The segment of our market that we see the most drastic decline in units sold is below $1,000,000. Experience tells us that this is the segment of the market where buyers are seeking mortgage financing and are the most challenged by the current mortgage struggles. The units sold count above $1,000,000 is similar to the first half of last year, and continue to remain in demand. The good news is that there are buyers in our market. Regardless of price point, we find that when a property offers a compelling value proposition, buyers tend to come out of the woodwork. There have been several multiple offers situations in the first half of 2008. Buyers are here, “lurking”. When they see value, they flock. More than ever, we are finding that correct pricing is critical.
I hope the following statistics* are helpful in getting a handle on the Santa Fe residential market. You will probably notice an increase in average sales price as well as a drop in the median sales price. We believe that the decrease in unit sales in the lower price ranges has propped up the average sales price considerably, and can not be considered an accurate picture of our marketplace. A decline in average sales price is generally considered a prerequisite to an up tick in side transactions, and we are cautiously optimistic that we will see market activity begin to balance out across all price segments if this trend continues. (*Please call Neil Lyon for a copy of this letter with statistical information included.)
Sotheby’s International Realty continues to pride itself on being affiliated with the most professional, qualified, and experienced real estate brokers in Santa Fe market place, and they are ready to go to work for you in your next real estate move. We also invite you to preview all of our listings on our company websites, www.sothebysrealty.com/santafe and www.santafesir.com.
Vice President/Qualifying Broker
Sotheby’s International Realty, Santa Fe Brokerage