It’s a buyer’s market in S.F.

When my wife and I sold our Santa Fe townhouse in 2006 and moved to Austria to spend some time with her family, we didn’t think we’d be able to afford to live in Santa Fe again. The price of housing was just too high for us.

Before we left, we spent some time looking in the Santa Fe Association of Realtors MLS listings for anything in the $250,000 range that looked livable. There wasn’t much.

We went to see a few homes with our Realtor, Christine Wiltshire of Santa Fe Properties. My wife, who grew up in a country in which houses are still built to stand for centuries, was shocked to see the condition of some of those 1970s- and ’80s-built homes.

She considered them only marginally better than the building her grandparents used to store their garden tools. “No way,” she said, “I’m not living in a shed.”

Over the next year, while in Austria, we’d occasionally log on to the MLS site to see what the Santa Fe housing market was doing. We grew increasingly pessimistic.

We started to seriously consider relocating to Eugene, Ore., where we could buy an excellent home in a great neighborhood for $225,000. I didn’t want to leave Santa Fe, my home for 23 years, but I didn’t want to live in a dump or spend eight times my annual income for a run-of-the-mill home either. (And, please, don’t even mention Rio Rancho.)

Then, in November 2007, a month before we planned to return to the states and several months since I had last looked, we took a peek at the SFAR Web site. Bingo! There were 93 residential listings for less than $300,000. Granted, many of those were gussied-up apartments — er, I mean “luxury condos” — but there were several really nice looking homes.

We called Wiltshire immediately. She told us she could show us “15, maybe 20 homes that are pretty decent.”

Something had definitely changed.

Plunge in
home sales

Today, three months later, I am writing this article in my new $239,000, three-bedroom, 1,500-square-foot home. It’s on the south side, off Rodeo Road, considered by many old-time Santa Feans to be the boonies. But, really, we’re only 15 minutes from the Plaza.

I think of it as the poor man’s Eldorado.

So, what’s happened to the Santa Fe housing market that allows two cheapskates like us to buy a house in the city we love with a mortgage under $800 per month — and still have money left in our savings?

“Santa Fe is such an isolated place that it took a while for the housing troubles in places like California and Texas to trickle down to us. But it did, and our market dropped,” said Wiltshire.

Overall, home sales in the city declined 36 percent over last year, according to the Santa Fe Association of Realtors 2007 Fourth Quarter Market Report. The median house price fell $25,000 to $350,000. The median price in southwest Santa Fe (the most affordable section of the city) dropped to $284,000.

Sellers are hurting while buyers are enjoying their time in the catbird seat. Active listings are up 32.6 percent, and those houses are staying on the market longer: The average DOM (days on the market) increased 100 days, going from 56 days in the fourth quarter 2006 to 157 days in the same period in 2007.

And nowhere are Santa Fe’s market woes (and opportunities) more apparent than in the under-$300,000 range. Sales have fallen in this category 42 percent over last year, resulting in a glut of lower-priced homes.

Five-point plan

According to Bob Chernock of Santa Fe Realty Partners, marginally qualified borrowers who mortgaged their homes with money from subprime lenders are now struggling to keep those homes.

“The sound of keys dropping on tables is astounding,” Chernock said.

In Santa Fe, homes under $300,000 are considered entry-level, with the most interest in this segment coming from first- or second-time buyers.

“The demand is not there, because buyers in that price range are not qualifying,” Wiltshire said.

The buyers of lower-priced homes, according to the SFAR, are having a harder time getting funding because of higher interest rates, tighter underwriting standards and rising consumer prices.

“There are no interest-only loans anymore,” Wiltshire said, “and people are having trouble coming up with a 10 percent or even a 5 percent down payment.”

Chernock suggested a five-point plan for home buyers in the $200,000 to $300,00 range.

“First, they have to have their full credit report pulled — not a summary — and get a copy in their hands,” Chernock said.

“Then they need to find a real, qualified mortgage lender who is capable of helping them. Many lenders are thieves and they hate it when you come in with your credit report in your hand. I suggest visiting two or three lenders, shopping rates and terms just like you would shop for a new car.”

Once a mortgage lender is selected, it’s time for the Realtor to get involved, Chernock said.

“The Realtor must sit down with the buyer and broker to discuss fees, points and conditions. That really is part of my responsibility, especially to the under-$350,000 buyer. Many first- or second-time buyers don’t understand the lingo,” he said.

“Then decide what kind of house you can buy and remember that in that price range time is of the essence,” Chernock said. “When properties fall below a certain price, buyers jump on them. If you think you can sleep on it, the house will be gone when you wake up.”

Finally, Chernock advised that the buyer get financially organized to purchase the house he qualifies for. That means clearing any bad credit, paying off debt and arranging the down payment.

And where in Santa Fe can you find a decent $250,000 home?

“There is no affordability on the north, east or even west sides,” Chernock said. “The same house that sold for $250,000 in Tierra Contenta will cost triple the price in South Capitol.”

Chernock pointed to N.M. 14, Nava Ade, Rancho Viejo (for “affordable townhomes”) and the areas off of Zia Road and Richards Avenue.

“There also are some great old homes in the Bellamah, Barrio la Cañada and Casa Alegre areas, but they need a tremendous amount of updating,” he said. “You can’t do this kind of major remodeling room by room, like you can when you paint or redo cabinets. You have to do the whole house: new heating, plumbing, electric. If someone says they can do it for less than $30,000 to $50,000, they’re blowing smoke.”

Long-term view

Both Chernock and Wiltshire think it’s a good time to buy in the $250,000 price range.

“People in some areas of Santa Fe, who bought their homes two or three years ago have lost 25 percent of their value, but now I think the values are pretty firm,” Chernock said.

“Appreciation may slow or even be flat for a year,” Wiltshire said, “but then it should get back to 7 to 12 percent annually, which is our average. So, if you’re only going to be in the home for two to three years, you might want to wait. But if you are planning to be in the house for five-plus years, there are plenty of great deals and great financing,” she said.

With all the affordable, comfortable homes on the market, why don’t buyers who qualify for higher-priced homes look at the $250,000 to $300,000 market?

“The majority of Americans want everything they can get — and more,” Chernock said. “People who live half-way up the hill want to live all the way up and don’t think they can be happy until they do.”

Wiltshire agreed, but added, “I discourage my clients from overextending themselves financially. Don’t stretch yourself; you want to enjoy your home. Leave some money to expand and personalize your new home.”

In 1963, my father bought a new home for a price that was equivalent to his annual income. Now, I can’t do that — but I can avoid the trap that Chernock suggested so many American fall into, and buy a home within my means.

And I can do it in Santa Fe. Who’d have thought?