In spite of the challenges we are facing in our COVID-19 world, real estate stands out as one of the strongest elements of our economy.
To illustrate this reality, Dr. Lawrence Yun, the Chief Economist of the National Association of Realtors (NAR) recently stated, “Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market. Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3%.” Dr. Yun further observed last month, that existing homes sales across the U.S. recently hit the highest level, since December 2006.
Dr. Yun also noted that the need for housing will grow even further, especially in areas that are attractive to those who can work from home. NAR highlighted—in its August 2020 Work From Home Counties report—that remote work opportunities are likely to become a growing part of the nation’s workforce culture. Dr. Yun believes that this trend will endure, even after a coronavirus vaccine is available.
Going to Dr. Yun’s observations, there is clear evidence over the past eight months, that people living in high-density urban settings, are seeing destinations like Santa Fe to be more attractive for home ownership. Beyond the architectural, cultural, art, food, sports and environmental attractions of our community, many people living in larger cities are simply looking for more wide-open space to work in, and raise their families.
Santa Fe has always been a place that consumers have found desirable for second home ownership. But the impact of COVID-19 in our lives and work, may accelerate the purchase of permanent residences in our city among people from our active real estate “feeder” markets (Texas, Colorado, California, et al.), as well as from other regions around the nation, as well as from overseas.
To this point, and as reported by the Santa Fe Association of Realtors (SFAR), the overall volume of home sales in the city rose by 24%, or from $313.3 million in 2019, to $389.5 million in the 3rd Quarter of 2020. The association’s 2020 President, Susan Orth, recently observed that “The Santa Fe housing market surged in both sales and prices during this quarter, following weak sales in the 2nd Quarter of 2020, due to the COVID-19 pandemic closures.” She further noted that, “The data demonstrates the robust strength of the Santa Fe housing market, even with historically low inventories, and the growing desire to acquire a home oasis in the pandemic era.”
To underscore these statistics, Gregg Antonsen, the Qualifying Broker of the Santa Fe operation of Sotheby’s International Realty, advises that our company—as the real estate market leader in Northern New Mexico—realized a home sales volume in the 3rd Quarter of this year (despite a huge drop-off in April/May due to COVID-19), that exceeded the company’s sales volume in the 3rd Quarter of last year.
Beyond Santa Fe, M. Steven Anaya, the Chief Executive Officer of the New Mexico Association of Realtors (NMAR), stated in this third quarter report, that to date New Mexico’s real estate market seems to be on track to maintain its 17% contribution to the state’s economy in 2020. He further observed that the economic impact of a home sale is not limited to just real estate related industries.
Anaya notes that expenditures related to a home purchase (such as furniture and remodeling) make up roughly 6.4% of the total economic impact of a home sale. Plus, there is a multiplier effect to account for the fact that income earned in other sectors of the economy as a result of a home sale, is then re-circulated into the economy. Additional homes sales also induce added home production. Typically, one new home is constructed for every six existing home sales.
But NMAR’s Anaya also observed in his report that the tight supply of homes for sale in our market has contributed to rising prices. In their recent report on the state of the market, SFAR revealed that median home prices in Santa Fe have grown by 16% from $396,500 in the 3rd Quarter of 2019, to $461,500 this quarter.
As NAR’s Dr. Yun notes, “Housing demand is robust but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities. To assure broad gains in homeownership, more new homes need to be constructed.”
In fact, research by the NAR indicates housing affordability is weakening as prices continue to surge. The jump in home prices of 11.7% nationally in August was way above family income increases of 2.2%. The lowest-on-record 30-year fixed-rate mortgage helps offset some of the high home prices, however affordability is a concern across the nation.
Creating affordable housing is something that real estate professionals, government and business leaders realize must be addressed, especially given the strain that COVID-19 has placed on our economy, and specifically the job market.
At the same time, the robust real estate market we are enjoying in Santa Fe and around the U.S. is clearly benefitting our local and national economies, while also providing a pathway for those who have an interest in, and capability to purchase a home.
Buying a property requires you to be financially sound and truly prepared to own a place you want to call “home.” Beyond all the financial elements associated with actually buying a home, you will also be liable for property taxes, insurance, maintenance, and repairs.
One positive note, is that mortgage rates are extremely competitive and at historically low levels, and this will most likely remain the case through the end of 2020.
With all of my home buyer clients, who come to me with their interest in a property purchase—with a desire to use a loan in the process—I always recommend that they initially meet with a mortgage professional. This first step allows them to determine what they are qualified to buy, based on their financial situation. Doing so also allows me, or any real estate broker, the ability to zero in on the home options that meet a buyer’s needs, and desires.
It is also recommended that you make sure you have enough money saved to cover around six months of essential living costs, once you make your down payment and pay closing costs on your mortgage.
And if you are planning to move from one jurisdiction to another, you need to allocate funds to pay for the cost of moving. But if you’re able to do all of your packing, as well as some or all of the transporting yourself, it’s far more affordable.
Of course, in our coronavirus world, you’ll need to use safe and secure health practices in your move, plus you will need to make sure that you follow COVID-19 related rules established by each state, should you be traveling between jurisdictions (e.g., the need to self-quarantine upon arrival; etc.).
Lastly, because of the presence of coronavirus, real estate professionals are using a range of technology tools to make the exploration of home options by buyers very doable in a safe process. Virtual tours using special elements allow home buyers the chance to see homes in a 3-D format, which was not often used by brokers during our pre-COVID-19 days.
These tools provide buyers with a method for narrowing the homes they are most interested in, thereby reducing the need for in-person tours, as they search for the perfect property.
Like every other professional operating today in the home buying/selling process, real estate brokers are using strict protocols for making the in-person viewing of homes as safe as possible (e.g., small groups of people to tour homes at one time; face mask requirements at properties; availability of hand sanitizers at homes; etc.).
Similarly, title companies, which handle the final step of closing on the purchase of a property, are using creative processes for accomplishing this task with little to no direct person-to-person contact (e.g., “drive through” document signing from your car; etc.).
Home inspection professionals are also providing their critical services to buyers (and sellers), while also keeping their clients at a safe distance from the actual inspection process, sharing pictures and written reports of problems discovered via electronic means, minimizing in-person communication.
My “All Things Real Estate” radio show website (ATREradio.com) provides a roster of real estate professionals who follow all required COVID-19 measures that meet the rules established by the State of New Mexico. In addition, these are some of the very best practitioners of all parts of the real estate purchase and rental process, and are regularly offering commentary on a variety of subjects important to consumers during our Sunday broadcasts.
I hope that this information is useful to you as you explore the opportunity to realize the “dream of home ownership” in Santa Fe. I’ll be offering you additional observations about the real estate market and the home buying/selling process on a quarterly basis in 2021. Also, we invite you to join us each Sunday (12-2pm Mountain Time), as we air the “All Things Real Estate” radio show on Santa Fe’s KTRC (1260-AM and 103.7-FM), as well as via streaming on SantaFe.com.