Shrinking supply, Escalating Prices in the Albuquerque Market

Albuquerque Journal  by Steve Sinovic, Journal Staff Writer

ALBUQUERQUE, N.M. — As the year winds down, Albuquerque-area residents still looking to buy a home, townhouse or condo are facing low inventories, which has created a seller’s market and higher prices, the main narrative for the residential real-estate market through most of 2017.

Shrinking supply has led to homes selling faster for more money, according to data compiled by the Greater Albuquerque Association of Realtors. The rise in home prices has been a boon to many sellers, and buyers have had to act fast to get the homes – especially moderately prices ones – that they wanted.

“We’re still running a little on the low side of inventory,” said Don Martindell, GAAR president in an early November interview when fall temperatures were in the 70s and open houses on weekends were well attended.

“Buyers are still on the hunt to find a home,” said Martindell, a broker with American Realty. And as we move into the colder months, some sellers serious about putting their homes on the market are encouraged to do so when there’s less competition, said Martindell.

“I’ve written offers for homes on Thanksgiving Day,” said Martindell.

Inventory decline

While November numbers won’t be crunched until early December, GAAR showed 3,300 residences for sale in its coverage area in October. “That’s a 17 percent drop (year over year),” said Martindell. And homes on the market have seen decent price appreciation, with the median sales price at $199,000, a 5 percent rise from the previous year. The average sales price rose nearly 9 percent from last October to $237,000, according to GAAR data.

Compared to last year, homes in the GAAR survey area are selling an average of eight days faster, according to the association, which tracks transactions in Bernalillo, Sandoval, Valencia Torrance and parts of Socorro and Santa Fe counties.

Victoria Murphy said the sales boost in the Albuquerque metro mirrors an uptick in other well-populated areas of New Mexico. Murphy is president of the New Mexico Association of Realtors, which recently reported that closed single-family home sales through September for the entire state were 7 percent higher than a year ago and 13.5 percent more than in 2015.

Murphy said the lion’s share of the transactions – 10,700 home sales – occurred in Bernalillo, Sandoval, Santa Fe and Doña Ana counties.

Supply is also a concern statewide, she said. One such area is Los Alamos, where the national laboratory is expected to increase hiring. “We still don’t have enough inventory” there, she said.

In Santa Fe, famous as a luxury second-home market, competition also can be stiff, even in the seven-figure range. Murphy recently was working with a Texas couple relocating to the area with a budget of $1 million. Within days of commencing their home search, their choices had narrowed from 24 homes to 18.

“The housing market continues to be a bright spot in New Mexico’s economy,” M. Steven Anaya, chief executive of the state association, said in a recent report. “And every home sale means an increase in real estate-related industries, moving services, consumer items and more.”

Short of demand

With the 2018 market right around the corner, people like Martindell worry that the pipeline of new homes coming online won’t keep up with demand for clients preferring these over existing homes, which often can frighten new homebuyers with “condition issues,” cramped layouts and dated appliances and decor. “The availability of entry-level homes is not at the numbers they were in the past,” said Martindell.

New homes are typically more expensive than existing homes, as builders must contend with shortages of shovel-ready land and labor, plus rising costs of materials and difficulty obtaining financing. While the Albuquerque economy is picking up slightly, adjacent states are seeing more momentum, which prompts new-homebuilders to gravitate to fast-growing markets like Denver and Phoenix.

Even as homebuying activity for existing homes in the Albuquerque metro area accelerated in 2017, construction of new houses has remained stubbornly low, due in part to anemic job growth, says an industry official.

Permits in central New Mexico for single-family homes will hover at about 1,800 this year – essentially same number of permits pulled during each of the past three years – and nearly one-third the level seen before the Great Recession. “Flat (activity) is where we’ve been stuck the past couple of years,” said John Garcia, executive vice president of the Home Builders Association of Central New Mexico, a 700-member trade association.

“We are an industry tied to job creation,” especially the better-paying careers that can help a buyer swing a new-home purchase, said Garcia. “We’re still building a great product,” Garcia said. “And even some of the production-oriented builders are customizing more.”

Recent announcements such as Facebook’s plan to build a new data center and the opening of Cabela’s new retail store have been a boon for those shifting to commercial construction, but neither project will create the kind of momentum to stoke single-family home construction, Garcia said. “We need a series of (positive) events in the economy to really move the needle.

The region needs a series of positive job-creation events, Garcia said, plus get a handle on crime and bolster education, to really move the needle. Attracting more retirees to the area would also help the production pipeline.

“The economy’s still pretty stale,” said Garcia, adding he thinks it’ll be three to four years before Albuquerque moves toward a more robust level of new-home construction.

Anemic building

Throughout most of the 1990s, metro-area builders pulled an average of 4,000 to 5,000 permits annually. The record years of 2004 and 2005 saw 7,719 and 9,445 permits issued, respectively. Homebuilding was a major engine of economic growth in the region, employing thousands of construction workers and providing business for scores of home-furnishing, appliance and landscaping companies.

Garcia also noted more homeowners appear to be “staying in place” and building additions to their existing homes, rather than buying new ones. The remodeling projects are gladly welcomed by HBA members.

Some developers have also shifted to multifamily, condo and townhome construction.