Homebuyers out in force, but will sellers follow?
Home sales are off to best start in five years, though inventory has dropped

Santa Fe’s housing market has lost its fear.

With buyers finally stepping up, the number of residential sales in the first quarter was the highest in five years.

“I think the buyers are tired of waiting,” said Stephanie Duran, an agent with Barker Real Estate. “My gut is they’re tired of being afraid. The threat of higher interest rates is greater than the fear of maybe declining prices.”

Alan Ball, an agent with Keller Williams Realty who compiles residential sales data, also senses a turn — at least from the buyers.

“Clearly we’re off to the best year in the last five years,” he said. “Buyers are more active. Maybe they’re tired of waiting, maybe there’s an increased comfort that they’re not going to buy when prices are going down.”

As home prices collapsed — down perhaps 30 percent from the top of the market in Santa Fe — many homes were pulled from the “For Sale” listings, and refinanced or converted to rentals. Other owners simply cannot sell because their house is worth less than what is owed to the lender, a situation known as an underwater mortgage. These owners would have to write a check at closing to cover the difference between what they would net with a sale and what is owed on the mortgage.

These factors have resulted in less inventory, which is down 30 percent from 2010.

“The decrease in inventory has created more urgency, Buyers recognize if they don’t buy this property, it might not be there.”

Janice Diamond, a self-employed massage therapist, was one of those on the hunt for a house Wednesday.

She’s been in Santa Fe for 25 years and is renting a place off Rodeo Road. She’s looking for more open space, fresh air and a home where her aging mother can live independently.

She also has three grown children living elsewhere and wants to offer them a comfortable visit. She looked several years ago, but every home was too expensive. Now she’s back with a mission of owning a home by the end of summer and has been looking with Barker agent Francine Miles.

“I’m really looking for a place that can be a home base where my family can gather,” she said.

Her quest for a home with a “mother-in-law” suite for about $300,000 would have been impossible a few years ago, Miles said. Today, the agent was taking Diamond to see several properties, including a bank-owned home off West Alameda Street, a short sale in DeVargas Heights, and an owner listing in Casa Alegre.

A short sale can be approved by a lender when the owner has a hardship such as a disability or job loss and cannot pay the mortgage. The home is put on the market and sold for less than what is owed. The bank determines how big a loss to take on the property, as that often gains the bank more money than going forward with full foreclosure, which requires court action.

Short sales will continue, as banks have gotten smarter about the process.

“There is still a common desire to look at foreclosures and short sales,” Ball said. “I just don’t think there are any super bargains anymore. The banks are more realistic in how to price these out of the gate.”

The short sale Diamond looked at has been priced at $319,000, or $152 a square foot, for 260 days. “You get to the point where the banks don’t want to lower it anymore,” Miles said.

Diamond also looked at a bank-owned, 2,000-square-foot home on 1-plus acres in the Cielo Lumbre subdivision off Alameda Street. There was a separate room/kitchen area that could be used for Diamond’s mother or a future rental unit.

It was described by Miles as “a smokin’ deal,” for $304,000, and her buyer liked the open space, mature landscaping, trees and views. “I feel like I can look at the sky out here,” Diamond said.

But many of the wood floor planks were missing, the vigas were aging, the home would need a new back deck and front portal, and there was no cooling, so that would have to be installed in place of the skylights. There would be a lot of sweat equity to be invested. Still, Miles said, “It is something at $300,000 that would have potential for a private quarters” for Diamond’s mother.

The question for Diamond, as with all buyers, is whether the investment would pay off. “If it [the market] goes up, what would this be worth?” she asked.

No one knows that answer, nor when sellers will join buyers and cast away their fears.

Even if prices have bottomed, as some believe, that doesn’t mean they will soon increase. There are still many distressed sales, and the percent of those actually rose in the first quarter to 26 percent of all sales, according to figures compiled by Sacks.

Sacks added that the distressed market has affected neighborhoods unevenly: If there is a foreclosure nearby, it means your home is worth less.

“It’s not like prices will immediately shoot up overnight. We’ll stabilize, and then gradually prices will go up,” he said.

Ball agrees. “Foreclosures have a direct effect on the neighborhoods they are in, and this ongoing dampening of the market is holding us back from true [price] appreciation,” he said.

For the summer buying season, however, real-estate agents have again found their groove.

Perhaps that has to do with the fact that, like the sellers, there are a lot fewer of them. Membership in the Santa Fe Association of Realtors is down 40 percent from 2007.

“We’re working 12-hour days again as Realtors,” said Barker agent Duran. “I recommend if you want to sell, sell now. We know today the buyers are buying.”

Contact Bruce Krasnow at brucek@sfnewmexican.com.

Distressed sales in Santa Fe County as a percent of all sales

2009
short sales – 2 percent
foreclosures – 5 percent

2010
short sales – 5 percent
foreclosures – 14 percent

2011
short sales – 7 percent
foreclosures – 16 percent

2012 – first quarter
short sales – 9 percent
foreclosures – 17 percent

– Warren Sacks, Barker Real Estate

First Quarter Residential Sales – Santa Fe County

2002 – 432
2003 – 473
2004 – 494
2005 – 523
2006 – 599
2007 – 423
2008 – 306
2009 – 205
2010 – 267
2011 – 273
2012 – 323

– Alan Ball, Keller Williams Realty

Santa Fe Association of Realtors membership

2007 – 1182
2008 – 1075
2009 – 941
2010 – 856
2011 – 786
2012 – 689

-SFAR