How’s the Santa Fe Market? It’s Complicated.

In 2010, Bloomberg Businessweek projected that Santa Fe would be among the Housing Markets that Will Be Strongest by 2014. Business Insider echoed that take in 2011 by declaring Santa Fe one of The 15 Best Housing Markets for the Next Five Years. Then, at the close of 2011, Santa Fe made Home.org’s list of the  Top 9 Real Estate Markets to Watch in 2012. Home Sales are up and inventory is down and dropping, but depending on which index or forecaster you follow, over the next year, prices are either slated to rise or to fall. So, what should a Santa Fe Real Estate Agent say in response to that standard opener: How’s the Market?

It’s complicated, but it’s a good relationship with lots of promise.

For the Santa Fe Metropolitan area, Fiserv forecasts an increase of 1.6% in home prices from the second quarter of 2011 to the second quarter of 2012, rising to a 13.8% improvement from the second quarter 2012 to the second quarter 2013. Housing Predictor, on the other hand, thinks home prices in Santa Fe will drop another 4.3% this year.

We’re feeling a positive change. While prices are mostly flat to declining –local market measures reported a 12% drop in median home prices from the closing of 2010 through the end of the 4th quarter, 2011– demand is up. Third quarter, 2011, closed with a 21% decline in inventory. Home sales exceeded new inventory over the last few weeks of the fourth quarter. The absorption rate –the amount of time it would take to sell all the homes on the market at the speed at which they are currently selling– is dropping in the upper market tier.

Simply summarized by Altos research: “As the Supply and Demand trends continue… we are likely to see upward pressure on pricing.”

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On December 7th, Lawrence Yun, Chief Economist for the National Association of Realtors, spoke at the Santa Fe Association of Realtor’s annual meeting.  Of the stream of information in his presentation, “Economic and Housing Market Outlook,” three points stood out:

Numerous metrics point to substantial pent up Housing Demand

US Housing Starts are at their lowest levels since WWII.  Existing Home Inventory is Falling even as distressed and shadow inventory flows in. Annual Household formation is trending upwards (US Population has increased by >27 million since Census 2000). There are more people, yet fewer homes.

Home Price Versus Rent: Price Change Potential

From 1980 to roughly 2003, home prices and CPI Rent Rates rose steadily in close companionship. The greatest gap between rents and home prices occurred between 2005 and 2007, with a spread 2/3rds that of the entire gain from 1980- 2003. Beginning in 2009, home prices crossed south of the line as rents held steady, starting an upward movement this past year. According to a recent analysis by The Economist, U.S. home prices are undervalued by 8% relative to Rent Prices. Investors take note.

Home Prices are Lower than Construction Costs

From 2000-2008, it was cheaper to build than buy. Starting in mid 2008, with one surge in 2010, it has been cheaper to buy than build. Add to that the challenge of obtaining a construction loan.

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Barclay’s Analyst Sees [a] Housing Rebound Coming in 2012. So do the prognosticators at Fiserv Case-Shiller and RadarLogic. “Twenty five of the metropolitan areas surveyed [by RadarLogic] reported a 15.4% year-over-year increase in home sales in September[2011], which is the largest gain for the month of September since 2003.” According to Fiserv, nationwide, home prices are expected to continue a decline until roughly midyear rebounding during the last half of 2012 into 2013.  Of the 384 home markets it tracks, Fiserv expects 95% to see gains, even if modest.

Consumer confidence is up. Sale to Investors have Surged But Foreclosures remain a concern.  And the impact of Europe’s economic troubles is a murky unknown.

Still, in Santa Fe, we have reasons to be optimistic. By Case-Shiller’s measure, “Santa Fe’s prices are down just 17.7% from the market’s peak in the fourth quarter of 2007.” The precision of that figure varies depending on location: some parts of town dropped more heavily; others took less of a hit. Yet overall, relative to the national market, Santa Fe weathered well. Our 5.4% unemployment rate compares enviably to that of many markets.

It’s a hot buyers’ market –we are the busiest we’ve been in years– but sellers can take heart: well-presented homes priced in line with the market are selling.

Whether you’re a buyer wanting to take advantage of terrific values or low interest rates, or a seller wanting an honest assessment of your home’s market price, we’d love a chance to show you how Santa Fe Real Estate Consultants can help you make the right decision based on your values and needs. Why Work with Us? Read what our clients have to say.

 

 

 

 

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The data relating to real estate for sale in this web site comes in part from the Internet Data exchange (“IDX”) program of SFAR MLS, Inc. Real estate listings held by brokers other than Sothebys International Realty / Washington are marked with the IDX Logo. All data in this web site is deemed reliable but is not guaranteed.

This IDX solution is (c) Diverse Solutions 2014.