Twenty years of trout fishing can teach you a lot about selling real estate. That may sound odd but you learn that fish are always hungry and homes are always selling. And there’s a big difference between fishing and catching fish and listing your house and selling your house. Here are some field notes from the front lines of trout fishing and selling real estate in Santa Fe.
Regardless of whether you’re fishing or selling, you must first ask yourself if you are really serious. For sellers, do you want to sell your home or are you okay letting it sit on the market? If your home is just sitting on the market and not getting any showings it’s not that there are no buyers, you are simply not in the market where the buyers are. Like fishing, you can go crazy trying things you saw on a T.V. show, reading how-to-do-it books or using the latest technology, but in order to succeed you must know the tools of the trade and understand the fundamental equation.
In real estate the goal is to create demand by positioning your property at the top of a buyer’s desirability list with the right marketing. Success in marketing comes from the right story, told effectively, in the right media, to the best prospects. For the trout fisherman, you must be equally well positioned by knowing the river, the parts of the river, and where in the river is best. You see, trout may be in the pool of water just in front of you but you need to know where they are feeding; at the surface, in the column, or near the bottom. The right fly presented in the wrong place won’t catch a thing. Landing a buyer for your home is no different.
So now you’re standing in a stream full of hungry trout and you watch as your fly drifts by, cast after cast, without any response from the fish, and you begin to wonder what’s wrong. Home sellers get a similar feeling when they prepare time and time again for showings that come and go without hardly any feedback. At this stage of the game you need to adjust the variables of the equation. The skilled angler will adjust three variables, size of the fly, the pattern of the fly, then the color. The more knowledge they have, the better choices they make with theses variables. They keep changing them until, boom, they catch a fish. Home sellers need to do the same thing. For the seller, they have two variables: the price and the condition. If you are getting showings and no offers, it comes down to adjusting the price and improving the condition. These are the two variables that add up to value for buyers.
There is a ready pool of hungry buyers out there and as they watch the daily e-mails of properties that have come on the market they will very quickly decide which properties interest them most. You know that your marketing is working when you’re getting showings. You know that your sales equation is working when you’re getting offers. If you are getting showings and no offers work on your pricing and make certain your property shows the absolute best it can. Optimism will keep you on the river, but knowing the equation will catch fish. If you are not getting the results you hoped for, don’t let optimism turn to despair, you must simply adjust your equation until you get your house sold. Until then, happy fishing everyone.
There have been many articles written about the state of our Santa Fe real estate market. Rather than comment on these articles, we thought it would be best to publish the data recently released by the Santa Fe Association of Realtors on January 16th. The quarterly statistics are the best indicators of our unique market. While the real estate market around the nation continued to improve by leaps and bounds, let’s see how Santa Fe fared.
In broader aspects the city’s total closed sale were up marginally from 187 sales in 2012 to 189 sales in the final 4th quarter of 2013. The median sales price for the city was almost even from $279,990 in the final months of 2012 to $280,100 in the 4th quarter of 2013. The county saw a slight dip in closed sales in the 4th quarter from 162 in 2012 to 158 in 2013. The median price in the county, however, slipped in the 4th quarter from $440,000 in 2012 to $379,000 in 2013. Overall inventory increased in 2013 from 3408 homes for sale at the end of 2012 to 3882 at the end of 2013.
By neighborhood, the northeast city limits had big gains in median sales price for the final 4th quarter. From $569,500 to $717,500, this 26% increase reflects more sales of million dollars homes than in the previous year but closed sales dipped year to date by 9%. Northwest city limits had a modest increase in the median sales price for the quarter from $322,400 in 2012 to $327,500 but closed sales increased by over 18%. The southeast city limits had an overall decline in sales from the previous year of 7% and a decline in median sales price from $545,000 to $475,000. The southwest city limits had a 20% increase in closed sales over the previous year and the median sales price here jumped to $229,250 from $195,000 in 2012.
The north county of Santa Fe had a busy 4th quarter with a 16% increase in sales. Overall, however, sales in this area declined almost 40% from the previous year and it is no wonder that the median sales price also declined by 30% from $635,000 to $443,750. The northwest county was also down overall for the year in closed sales by 7% but the median sales price did increase modestly from $675,000 in the 4th quarter of 2012 to $695,000 in 2013. The southeast county was also down for the year in closed sales by 8% and the median sales price dropped from $383,250 in 4th quarter 2012 to $353,750 in 2013. The southwest county saw a huge increase with closed sales almost doubling from the previous year. The median sales price, however, did decline from $320,000 in the 4th quarter of 2012 to $274,000. Eldorado, which is typically a more consistent market, had a rocky 2013 with a 30% decline of overall sales. Median sales price, however, stayed relatively even at $339,000 from $338,425 the previous year.
So, in a nutshell what does all of this mean? We believe that the positive factors outweigh the declines and that 2014 should continue to be an improving market. We do not believe huge appreciation overall is likely this year nor next year but if we continue to gain 3% every year, the market will recover its equilibrium.
Last Wednesday, the Federal Reserve announced it would begin gradually paring back on its purchase of non-traditional assets aimed at stimulating growth. Beginning in January the Fed will reduce it’s monthly purchase of Treasuries and mortgage-backed securities by $10 Billion, from $85 to $75 billion. The statement also outlined forward guidance for the Federal Reserve’s primary policy instrument, short term interest rates.
Federal Reserve Chairman Ben Bernanke delivered remarks Wednesday in Washington, at his final planned news conference before he steps down.
Chairman Bernanke made it clear that the Fed’s easy money policy would continue beyond the previously indicated threshold of 6.5 percent unemployment. He also announced that that rates would not increase until 2015 at the earliest – a consensus among the committee’s voting members.
Our KW Research Department decoded the decision to find out what it could mean for you and your clients.
Because of the Fed’s purchase of mortgage-backed securities it’s likely that mortgage rates will continue to rise, though it may not be a dramatic increase given the modest reduction in the purchase of these assets. Nevertheless, sellers who need to move to a new school district or into a larger home, should consider listing sooner.And buyers who are on the fence would be wise to whittle down their list and make an offer, especially those who want to purchase in areas where prices are spiking.
The decision could also encourage cash-rich onlookers to come out and buy – at least those who can afford it. Several industry experts from the National Association of REALTORS and RealtyTrac were quoted in an article on MarketWatch, stating their belief that despite the motivation, these cash-only deals are unsustainable in the long-term.
Overall, the Feds increased clarity coupled with the expectation of continued monetary accommodation and low, short-term interest rates should keep the economy growing. This was well-illustrated last week when markets responded favorably putting the Dow Jones up nearly 300 points (1.8 percent).
On January 10, 2014 another aspect of the Qualified Residential Mortgage Rule passed by our friends in Congress as part of the Frank-Dodd Legislation from 2010 will go into effect. Designed to protect consumers against mortgage fraud, the question remains if it will improve or hinder our local housing recovery.
The essence of the Qualified Residential Mortgage is to ensure the ability of the borrower to repay the mortgage through extensive investigation by the mortgage lenders into credit worthiness and income evaluations. Certain considerations made by lenders will include:
(1) current or reasonably expected income and assets, (2)current employment, (3) monthly payments on covered transaction, (4) monthly payments on simultaneous loans, (5) monthly payments for mortgage related obligations, (6)current debt obligations, alimony and child support, (7) monthly debt-to-income ratios or residual income and (8) credit history.
While the previously proposed required down payment rule was aborted, the QRM does have a debt ratio guideline that might affect buyers. The debt to income ratio can not exceed 43% so if you are thinking of purchasing a home, you might want to put off buying that new car. This one aspect is the most troubling for all the consumer protections it touts. Mortgage experts state that 20% of loans presently originated have higher than 43% consumer debt ratio, so to take a potential 20% of buyers out of the housing market may certainly impact our recovery.
The benefits to the consumer can be seen in the prohibition of negative amortization and interest only payments. Also, mortgage loans can not exceed thirty year repayment period. And the QRM does have a limitation on points and fees that can be charged which is generally about 3% of the loan amount. For borrowers, predatory lending has been curtailed and the likelihood of overselling and becoming “house-poor” will be a notion of the past.
For mortgage companies the changes have little effect on how they have been doing business since they tend to be risk adverse anyway. After all, making certain that the borrower can repay a loan is the cornerstone of that industry. But now with the threat of having to buy back a bad loan, the mortgage companies will be more diligent in their scrutiny of every hopeful borrower.
For anyone who has been around the sun a few times, you know that if it was made by Congress you can bet that they made it with loopholes and the QRM is no exception. There are guidelines for loans that exceed the debt to income ratio to create more flexibility. Just who will fall into these guidelines is a mystery. Fortunately, Fannie Mae and Freddie Mac have an exemption to the 43% debt to income ratio which may still be discretionary, but at least there is hope. Not all qualified borrowers with a higher debt to income will be excluded from the market.
For loans originating after January 10th, it may seem as though an IRS audit would be easier to deal with then qualifying for a mortgage but if it results in stability in the housing market and protection of homeowner wealth, we are all for it. We applaud the prevention of predatory lending practices and the aim to prevent another recession by easy access to money. Getting rid of mortgages that borrowers can only afford for the first year is a good thing. And saying goodbye to those get rich quick seminars that promise real estate investors quick return with no money down and no qualifying is also a good thing. However the reality is that every borrower is a risk and we don’t want to see Congress enacting over-stringent guidelines that will squeeze out the hard working individual who is trying to achieve the very essence of the American Dream and that is home ownership.
This beautiful building site is still available, but maybe for not much longer. It could be yours!
Update on closings and new contracts for October 2013:
We celebrated the arrival of two new families to Las Melodias de Las Campanas this month. The beautiful single level Mezzo model at 2 Camino de Colores (lot 23) was completed and closed and the owners have now moved in. And just last week the spectacular single level Soprano model at 28 Camino de Colores (lot 9) was completed. You will easily recognize it by the Andalusian style stone work that graces the front of the home.
New contacts for October include the sale of Lot 16 which is on the golf course and has amazing views of both the Sangre de Cristo and Jemez mountain ranges as well some of the best views of the golf course. The model selected for this lot is the a single level Mezzo which will bring those views right into the home. Also going under contract this month is Lot 12. This lot now sells out our “Island” and the new buyers are planning on building a two story Contralto model. This will be the first Contralto and it will be a perfect fit for the “Island” as it will take advantage of views of both the water feature on the 14th fairway of the Sunset Course and views of the 7th fairway of the Sunset Course.
The best building sights are selling fast but we still have some exciting golf course and view lots for you to choose from. If you are thinking about buying a new home come on out and see us.
There are many questions about the Short Term Rental Ordinance implemented by the city in 2007 and amended in 2009. Passed by the city council to protect the quality of life in our dense urban areas and to provide safety from the impact of over crowding, this ordinance is for residential neighborhoods only. Properties located in the business and commercial districts are not impacted. Of the 350 permits allotted for the program, there are none available and there is a waiting list of approximately 15. Here are some guidelines if you are considering this practice.
A short term rental is defined as a rental for less than 30 days. Exceptions include the owner who resides full time but allows a “vacation rental” of their property for two rentals per calendar year. In that instance only, a permit is not required. Short term rentals that occur in a development containing resort facilities or those operated by an owner who resides on a contiguous lot are allowed as long as they are operated in compliance with the ordinance. Currently, only the development of Quail Run is defined as a “resort” facility. Operators of these rentals are required to obtain a permit but these do not count towards the 350.
Permit holders must adhere to a strict set of rules. These include no more than 17 rentals per calendar year and only one rental within a seven day period. Off street parking must be provided and the number of persons allowed is twice the number of bedrooms available. No recreational vehicles are allowed and there is a noise curfew of 10:00 pm. The owner of these permits must keep detailed and accurate records and pay all applicable taxes in addition to lodger’s tax, gross receipt taxes, and of course, income taxes.
Short term permits are assigned to a property and not the property owner. If you purchase a property with a permit you need to know that it does not automatically convey. The new owner must, within 30 days, make application for the transfer of the permit which includes proof of ownership, site plan, floor plan, and the $500 fee. Failure to do so means the permit will be released back into the rental pool for issue the following period. To be exact, if owners have not paid for their renewal on existing permits by March 15th, they will likely lose them. Maryanne Seiderer, the intrepid enforcer of the city’s ordinance, makes the call on the 16th of March to the waiting list. If you get a call from Maryanne, don’t delay in a return call. She’ll give you 48 hours to get back to her or else she’s on to the next name on the list. These permits have value and she’s got a job to do.
The city has taken some owners to task for non-compliance of the ordinance. Complaints include noise after 10 pm, rentals that exceed the allotted number, and the biggest problem, owners who believe that the city does not have the right to tell him what he can do with his property. While the first instances appear minor, the city has pulled permits after issuing 3 violations. For the last offense, 90 days in jail and a $500 fine could be your penalty if you attempt to challenge the city. Anonymous tips are called in for enforcement, so be advised. The city has a short fuse when it comes to the short term rental ordinance.
We recently attended a presentation at the Santa Fe Home Builder’s Association that provided good news for the housing market. The topic was the FHA 203K Loan program. Unknown here in Santa Fe, these loans have been around for over a decade but just recently exploded across the nation with 23,000 loans originated last year and a 700% increase in the last 4 ½ years. What makes these loans so exciting? These loans allow borrowers to add the cost of home improvements into a single mortgage package. Roughly one-third of the properties that are on the market today are considered distressed and buyers do not have the extra cash necessary to make improvements after closing. This is where the 203K Loan comes in.
The benefits to this program are numerous. For the buyers, it provides a single government insured loan at competitive interest rates. Currently, that interest rate is a quarter percent higher than FHA rates and allows for the standard FHA down payment which in some cases may be as low as 3.5%. For properties that are older and require work, these loans allow the sellers to market to a greater pool of potential buyers. Typically, an older home that requires a great deal of work will languish on the market until an investor comes along to scoop a deal. A recent study by Realty Trac showed that investors who pay cash are able to purchase a property for 34% less than an owner occupant. With the 203K Loan program, that seller can still obtain a fair market value for the property and allow the buyer to make the necessary repairs and renovations that work best for him.
The program has two tiers. The Streamline 203K is intended for uncomplicated repairs and improvements. The minimum loan amount is $500 up to the maximum HUD limits and may include new carpet, tile, kitchen renovations, roof repairs, and even window replacement. The Standard 203K is designed for more complicated projects and is a minimum $5000. Structural issues and projects that may require more time and permits would fall under this category and older properties may be required to be brought up to current building codes.
So how does this program work? Let’s say a buyer finds a property but it needs work, lots of work. The buyer has a team that includes the Realtor, the mortgage specialist and a contractor. Bids are created for all the work the buyer wishes to have done. A contract is negotiated between buyer and seller that reflect the value in current condition and a contingency will be necessary to allow for 203K Loan approval and additional repairs that may be required by the lender. The appraiser will factor in the value of the finished repairs and that is the basis by which the lender will determine the base loan amount. HUD guidelines have a maximum loan amount of $427,500 for a single-family home.
In Santa Fe there are many older homes on the market that would be perfect candidates for such a loan program. This is another great way to not only offer a buyer and seller more choices in this market but also to improve property values and revitalize older neighborhoods. Creating a good team that works well together and are familiar with these loans is important due to details and strict timelines. The 203K Loan is the perfect product for our local market so if you think this program might work for you, or you simply would like more information please give us a call or e-mail.
In December, we were fortunate to have Dr. Lawrence Yun, Chief Economic Advisor for the National Association of Realtors, give a presentation of the housing market and his forecast for the future. Most of what he presented was a study of extremes: never before has home ownership been more affordable yet pending home sales have not picked up; home prices across the nation have been stabilized for 2 years yet most believe that values are still falling; interest rates are at unprecedented lows and yet a conventional mortgage has never been more difficult to obtain. In a phrase coined by a silly Saturday Night Live skit we ask, “What’s up with that?”
New housing starts are at a 40 year low and new construction inventory levels are at the lowest since 1963. The trend for multiple family housing is on the rise and it’s common for college graduates burdened by student loads to move back home. Consider the consumer price index which has increased 160% in the last 30 years and includes a 150% increase in the cost of food and a 700% increase in the cost of college tuition. Conversely, mortgages have only increased 17% in that same 30 year period due to the difference in interest rates available now versus then while rents have increased 200%. It is no wonder that investors are turning back to real estate as a viable commodity to place their cash.
In Santa Fe, the final fourth quarter did see continued improvement overall in our housing industry. Most notably, new listings have gone done from 3194 homes for sale at the end of 2010 to 2604 in 2011. Pending sales were down 9% from the previous quarter but year to date closed sales did see a modest increase of 2.4% over last year. The percent of original list price a seller can expect to receive has fallen slightly to 87.9% while the days on market improved slightly to 243 days. The median sales price has fallen to $320,443 down almost $10,000 from the previous year; however, the month’s supply of homes is down almost 24% to 15 months.
The median sales price continued to decline in all areas of Santa Fe but two: the Northwest quadrant had an increase of almost 20% over 2010 for a median price of $627,500. The city Southeast north which includes the Railyard and South Capital saw an increase of 11% with the median price here at $579,000. Hard hit areas include Tesuque and Pojoaque whose prices have declined 42% from 2010 but sales here did increase 120%.
Most areas did see gains in the total amount of sales for 2011. The one exception was the Southwest County including Rancho Viejo and the Community College district out to La Cienega and Highway 14 which saw a decline of 20% of total sales for the year. For land sales it was a yet another tough year with a total of 35 lots reported sold with the average lot price at $125,000 up from the previous year’s average of $110,000.
So what is going to change for 2012? There are many signs that our economy is improving but we believe it is up to us to continue to pressure our government and financial institutions to put forth the initiatives that will bring further improvement. And while they are doing that it is incumbent upon us to keep our own sense of hope and optimism alive. The missing piece of the puzzle is consumer confidence so keep sight that our economy is improving slowly everyday and our continued appreciation of that can be contagious. Together we can make 2012 a confident year!
- The Complete Realtor
- Luxury Housing Report – March 2014
- Final Fourth Quarter 2013 Real Estate Market Report For Santa Fe
- Fed Says
- QM: What’s all the buzz abouttttt
- Short Term Rental Ordinance
- 203K: Financing for Problem Properties
- 2011 Market Review
- Rabbit Rabbit Rabbit
- Let’s have a nice new year
- The Lost Art of Negotiating
- Su Casa Magazine
- New Mexico Magazine
- Santa Fe Opera
- Balloon Fiesta
- Santa Fe Indian Market
- Ski Taos
- Ski Santa Fe
- Golf: Black Mesa
- Golf: Marty Sanchez
- Golf:Towa at Buffalo Thunder
- Golf: Santa Fe Country Club
- Golf: Quail Run
- Georgia O'Keeffe Museum
- Yoga: Bikram
- Yoga: General
- Yoga: General
- Day Spa
- Fly Fishing
- Fly Fishing
- Ranches & Horse Property
- Las Campanas Homes