An interesting phenomenon is playing out across the country. The national stock of unsold homes is increasing. According to a recent report by the National Association of Realtors, the number of homes listed for sale rose 3.3% in June, to 1.25 million units. While the increase in inventory is still not enough to significantly affect demand, it is a relief for buyers as they compete with their peers for a successful home purchase. Local leading indicators confirm that the phenomenon is also playing out in Las Cruces, but to a greater extent.
According to an Aug. 16 report from the Association of Real Estate Agents of Las Cruces, our inventory of unsold homes has increased 23.3% in the past 30 days. The report also found that during this same period, the number of pending sales decreased by 35.3 percent. A sale is considered pending after the signing of a purchase contract and before the transaction closes and is the best indicator of sales concluded 30 to 60 days in advance. The number of sales at or above asking price also declined, falling 4.4% in the past month. To complete the indicators, the percentage of sellers who reduced their prices before the sale, which increased by 38% between the first half of July and the first half of August.
The bottom line is that the pace of sales at Las Cruces is declining, with the possibility of a reduction in the appreciation rate not far behind. Discussions with local real estate agents have given rise to a number of possibilities driving the changes, one of which is the seasonal change which usually begins around this time of year. Historically, local real estate agents reserve about 54% of their sales during the spring and summer “selling season” and 46% of their sales during the fall and winter months.
Another factor contributing to the decline is the number of buyers who are priced out of the market, which was most notable in the fourth quarter of 2007, when our local median price hit $ 218,210. To be eligible for this award, a working household had to earn an annual income of $ 67,959. Unfortunately, the area’s median income at the time was only $ 37,500, which only qualified one person or family to qualify for a home priced at $ 123,058.
Fast forward to the second quarter of 2015, when our region’s median price hit $ 154,000. At the time, our region’s median income was $ 3,360 more than the annual income required to qualify for the median price home. Today’s median price of $ 269,408 for new and existing homes, townhouses and condominiums sold in July has once again significantly exceeded our region’s median income by just over $ 43,000. .
Mortgage rates were not cited as a factor contributing to the decline in numbers, but it will be more difficult to qualify when rates finally start to rise. A 1% increase in the interest rate on a $ 200,000 mortgage, from 3.0% to 4.0%, would require just under $ 4,500 in additional annual income 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 out of state. Empirical evidence from local accountants, dentists, auto stores and others indicated that a third to half of their new business came from transplants out of state. This bright spot might fade a bit if residents living outside have a harder time selling their existing homes in the future.
See you at closing!
Gary Sandler is a full-time real estate agent and president of Gary Sandler Inc., real estate agents in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or [email protected].
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