There is no easy answer to a question about the relative health of Santa Fe’s real-estate market at this point in the recession. People have lost their jobs. Builders and Realtors have gone out of business. Owners have lost their homes and companies to foreclosure. But here and there, the city seems to be thriving.
Try getting to a seat quickly at Tomasita’s Restaurant. It’s been popular for a long time, but the place is really packed since the Rail Runner Express began delivering visitors from Albuquerque a few paces from the restaurant’s door last December.
My first interview in this months’ examination of the real-estate market was LIZ CALE, principal broker at Santa Fe Properties. She said:
Tomasita’s is one of my favorite restaurants, and there actually many in town that are busy, and you really get a sense of the confidence returning, and we’re seeing that in real estate as well.
Maybe it’s all about banks and individuals loosening up on loans and spending.
I agree with that, because people kind of froze up. I have seen that change in the last 60 days, at least locally.
And how are your sales stats in this company?
Every month they’re better. This will probably be one of our better months. Look in our parking lot and see the number of out-of-state license plates. These are people who have planned to come to town around Indian Market, but they also scheduled to work with our brokers at the same time.
Who is looking to buy?
You know, we’ve been fortunate to have so many national recognitions like the 2009 Dozen Distinctive Destination list of the National Trust for Historic Preservation. There are so many draws to this beautiful place, so you get people that fell in love with Santa Fe years ago and they return and plan to buy a second residence or plan for retirement here. People are coming from all over the United States.
Some of the feeder markets — such as in California, Illinois, and Florida — have suffered a lot more than Santa Fe. How is that affecting the market comeback?
There are some problems, but I think the indicators are showing that there won’t be further decreases except in the hardest-hit areas, like Las Vegas and Phoenix. I think most of our feeder markets are strong, and the new American Eagle connection to Dallas and Los Angeles will help us.
The lending restrictions have gotten tighter and tighter. It’s so unfortunate that has to be the case, because there are some strong borrowers out there having problems. And the federal government can’t continue special programs for first-time homebuyers, because it would send us into inflation. It’s one of those things that if people wait too long… in certain areas we are starting to see signs of a bottom.
We haven’t seen the bottom yet?
You have to be careful, since there isn’t a set answer for everything. It has to do with inventory.
Are many agents experiencing a problem between offer and closing?
Well, there are new regulations that are coming on board, so there are more wait periods for disclosures, and some people do fall off. A large part of it has to do with the financial institutions. Even with prequalification, you’re more under a microscope than before. There might be multiple properties and there can be issues on how they’re being held. There are so many rules and I can’t even begin to keep up with them. That’s the beauty of having a Century Bank office here in our building. That’s our job, to connect people with the other professionals.
What’s the outlook, do you think?
I think there’s more good than bad. People need to be careful that they don’t miss the timing of what they can do right now. It’s all about confidence, and if you wait too long to see the bottom, you’ll miss the opportunity to buy on the bottom.
EVALYN BEMIS, an owner-broker at City Different Realty
What’s the reality of the market at this moment, as you see it?
My personal experience is that there has been a bit of uptick in activity. People are largely looking for good buys. We, for a long time, were able to say that Santa Fe was in its own class and we didn’t march to the beat of the national market, but that’s just not true; we’re not isolated from it.
What I’ve seen in my own listings is that you get to a sweet spot in the price and then the market responds. I had an appraiser say to me that the things that were A-1 were still achieving good price and maybe a better time on the market, but that’s everything tip-top and with all of the right ingredients, including location. And for everything that’s not A-1 right now, price has been a very strong motivator.
I got an Eldorado listing priced below where I thought it should be, finally, and we went under contract pretty quickly. Then I had three different Realtors call me and say they would write an offer if it fell apart.
To me that says that we did get to a price where people suddenly perceived a value, and also buyers don’t like to step out: they saw it and liked it, and then once they see someone else getting a good buy, they wish they had done it themselves.
When will the widespread shift in confidence come?
People are just afraid, you know. We’ve all just been set on our heels by how deep this correction went, and for how long.
I am grateful for the correction in some respects, because the lending that was going on was insane. The last thing I want is for my clients to stumble and lose their place. I tend to be very conservative. I want people to have a good down payment and a comfort level about possibly hitting a rocky place in the road.
It seems like what’s really hurt people is job security. Again, we thought we’d be immunized against this correction because we have so many coming here as a lifestlye choice, not because of their jobs, but even the people who are already here have seen the contraction, and then the lending criteria have gotten a lot tighter.
We were hoping we would see much more forward progress this year; I think it will be more next year. But I think the smart buyers still have great opportunities out there.
What I say to anyone I’m working with is that I hope they have at least a 3- to 5-year timeline regarding how long they’ll hold onto the property. I wouldn’t advise anybody to buy now for speculation but that’s just me. I’m conservative. It’s like what they say about art: Buy it because you love it and then if it goes up in value, yippee.
CHERI JOHANSEN, executive director of the Santa Fe Area Home Builders Association
Is it true that local builders haven’t seen the surge in remodel jobs that they expected from people who decide to keep their homes rather than “trade up”?
I don’t think it’s been as much as we thought. A lot of people can’t get home equity loans. Let’s say you have a $500,000 home you want to remodel. In times past, you probably had $50,000 or $60,000 of equity you could use, but now the values are down and maybe you can’t get enough to do it. It’s really all about the availability of money, unfortunately, and I don’t see that changing until the banks get more confident.
However, I don’t think we’re getting worse. In Santa Fe, our market crashed in the fourth quarter of last year and the first quarter this year. It was disastrous then. It has improved, but it has not nearly come back.
I just got the permit data in the Housing Journal that’s put out by the New Mexico Home Builders Association. There were 47 residential building permits issued in Santa Fe County, year-to-date through June. In 2008, there were 84, and in 2007 it was at 174, so it’s been about half down each year.
We’re losing people in the industry.
A lot of the subs. Most of my contractors that are still in business are down to a skeleton core, their good people they don’t want to lose. That includes Lockwood Construction, which is big in Santa Fe. People have moved away and gone into different trades. We’ve lost a lot of good people.
NEIL LYON, longtime broker with Sotheby’s International Realty in Santa Fe
What’s the reality of the market for you at this moment?
In terms of closed sales, the upper end of the market, $1 million and above, is off by about 55 percent from last year. But I do have a great stable of sellers with wonderful, reasonably priced houses, and we’re attracting more than our fair share of buyers.
What’s the profile of the average buyer?
Up until a month or two ago, we were seeing primarily people buying because of relocation, but we are again seeing vacation-home buyers. It’s a very good development.
Have things improved in some of our feeder markets?
Yes. Definitely. Sales are up in the states that have been hardest hit: California, Nevada, and Arizona, because prices are down so significantly. Markets are definitely starting to heal, but at different rates because they were hurt to various degrees.
I take a very conservative view regarding the time frame that will be required for markets to return to some semblance of the condition we’ve been used to. Back in January, February, and March, we were showing three to six listings a week and now we’re up to four to seven a day. We’re as busy as we can be right now. But, having said that, buyers are very cautious. Negotiated prices are very disappointing from the perspective of the seller, but the sellers who are selling their houses are more grateful for their sales than they are disappointed about prices.
In August, the BBC reported that the economies of France, Germany, Japan, Hong Kong, and Britain rose out of recession.
That’s great. Some are already saying we’re out of recession. But I am very mindful of the severe unemployment situation and I’m also very mindful of the commercial mortgage market.
What about the mortgage scene?
The residential scene is frightening. Santa Fe has fared better than most, but quite a few people are being hurt in terms of mortgage defaults and foreclosures. The residential foreclosure issue is serious and from what I hear from friends who are involved, the commercial mortgage market is going to go through a very difficult time, and that’s starting to become apparent in terms of foreclosures.
But in the residential market we are seeing a level of confidence and engagement that’s really different from anything we’ve seen for almost a year. Five or six months ago, buyers who came to town left without buying because they were all convinced that prices would continue to drop. We now have buyers coming in who are confident that the bottom is near or that we are at the bottom to the point they are now engaging and buying homes.
There isn’t the expectation that property values are going to drop another 10 or 20 percent, like there was six months ago. There are still plenty of buyers who are very cautious — I don’t want to overstate the level of confidence — but buyers are making decisions.