An interesting phenomenon is playing out across the country. The nationwide number of unsold homes is increasing. According to a recent report by the National Association of Realtors, the number of homes for sale rose 3.3 percent to 1.25 million units in June. While the spike in inventory is still not enough to significantly affect demand, it does provide some relief to buyers as they compete with their competitors for a successful home purchase. Local leading indicators confirm that the phenomenon is also taking place in Las Cruces, but on a larger scale.
According to a report by the Las Cruces Association of Realtors on Aug. 16, our inventory of unsold homes has increased 23.3 percent in the past 30 days. The report also found that pending sales fell 35.3 percent over the same period. A sale is pending after a sales contract is signed and before the transaction is completed and is the best indicator of completed sales 30 to 60 days in advance. The number of sales at or above the asking price also fell, falling 4.4 percent last month. The indicators are rounded off by the percentage of sellers who lowered their prices before the sale, which rose 38 percent between the first half of July and the first half of August.
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The bottom line is that the pace of sales in Las Cruces is declining, with the possibility of a reduction in the rate of appreciation not far behind. Conversations with local brokers revealed a number of ways that are driving the change, including the seasonal change that usually begins around this time of year. Historically, local brokers book around 54 percent of their sales during the spring and summer “sales season” and 46 percent of their sales in the fall and winter months.
Another contributing factor to the decline is the number of buyers being withdrawn from the market, which was most notable in the fourth quarter of 2007 when our local median price hit $ 218,210. To qualify for this award, a working household had to have an annual income of $ 67,959. Unfortunately, the median income for the area at the time was only $ 37,500, which only allowed an individual or family to qualify for a home priced at $ 123,058.
Fast forward to Q2 2015 when our area’s median price bottomed out at $ 154,000. At that time, our area’s median income exceeded $ 3,360 the amount of annual income required to qualify for the average home. Today’s average price of $ 269,408 for new and existing homes, townhouses, and condos sold in July again surpassed our median income of just over $ 43,000.
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Mortgage rates have not been cited as a contributing factor to the decline in the numbers, but they will make it harder to qualify when rates eventually start to rise. A one percent increase in the interest rate on a $ 200,000 mortgage from 3.0 percent to 4.0 percent would require just under $ 4,500 annually to qualify.
The only bright spot that has resulted in additional sales of mid to high priced homes is the number of people moving to our area from other states. Empirical evidence presented by local accountants, dentists, car dealerships, and others reported that a third to half of their new business came from transplants outside of the state. This ray of hope could get darker if it becomes more difficult for out-of-staters to sell their existing homes in the future.
See you when you close!
Gary Sandler is a full-time real estate agent and President of Gary Sandler Inc., Realtors in Las Cruces. He is happy to answer questions and can be reached at 575-642-2292 or [email protected]
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