July 7, 2004

For the first six months of 2004, combined city and county residential sales in Santa Fe* totaled around $442,229,000, a thirty percent climb from $340,351,000 for the same period last year. This vigorous rise reflects similar jumps in other hot real estate markets as buyers scrambled to close transactions before rates moved higher. Not surprisingly, in order to keep monthly payments as low as possible, many buyers are now opting for interest only payments. What is surprising is mortgage rates have reversed direction and actually dipped in the last six weeks, spurring more refinance activity (all but dead two months ago) and keeping the purchase money market healthy. We see this benign rate environment continuing for the rest of the year as the general economy cools from its torrid pace of the first six months. However, we’re concerned that many real estate markets, including Santa Fe’s feeder cities, may slow unless housing prices stabilize and in some cases (i.e. the upper end in Santa Fe) come down.

Overall, we anticipate that 2004 will trump last year in dollar volume by at least fifteen percent. In Santa Fe, according to our statistics, the average sales price for a home rose to $356,924 from $322,050 for the first six months, and the median price jumped to $285,000 from $262,334. These represent all-time high prices for the City Different. (Note: “Average price” means the aggregate dollar of combined home sales divided by the number of homes sold. “Median price” is the price at which half of all sales occurred above and half below.)

While this is hardly news, the upper end (above $1.5 million) continues to struggle. Approximately 260 homes are on the market above $1 million, including 137 above $1.5 million. For the first six months there were 28 sales over $1 million, including 7 (in MLS) over $1.5 million and 4 (1 in MLS) over $2 million (not all of these were reported to MLS). There are always exceptions—the historic Eastside is still strong—but anybody listing their home above $1.5 million should expect at least a one to two year wait for a buyer. On the positive side, there are some exceptional values right now, reflecting significant discounts (15% or more) from original asking prices, and we are hopeful that buyers will soon seize these opportunities. There are several explanations for our soft upper end.

• First and foremost, we are a discretionary, quality-of-life market, and largely reliant on boomer demographics. Our upper end is driven by second home and retirement purchases, and competition from other states is steep.
• There appears to be a national trend among upper end buyers that, rather than purchase one expensive home, they are choosing multiple, less expensive residences in various cities, reflecting a buyer’s diverse interests.
• There is an underlying anxiety about the November elections and, should the Democrats prevail in Congress, worry over tax-law changes, particularly capital gains treatment.
• We are now harvesting a bumper crop of expensive spec homes, which are coming to market at the same time as individual residences, sometimes built several years ago, where the owner has decided to leave, or scale down, in Santa Fe.

In Los Santeros and Las Campanas, Santa Fe’s premier golf course communities surrounding two Jack Nicklaus courses, there were 22 homes sold in the first half of 2004, half of them for under $1 million. This is better than par (pun intended) when last year 17 homes sold in the first six months, with eleven under $1 million. We would still characterize Las Campanas as a recovering market burdened with significant inventory. Even if mortgage rates remain flat for the rest of the year, inventory levels should keep a lid on prices—or send another message to upper end sellers that prices need to soften to attract buyers.

Currently there are 83 homes for sale in Las Campanas, 60 of them priced over $1 million, including 11 over $1.5 million. In Los Santeros, under construction are two “ventanas” (approximately 4100 and 5200 square feet respectively) selling for around $300/sq. ft. In addition, there are 17 “villas” scheduled to be built this year (ranging between 1560 sq. ft. and 3000 sq. ft.) which will sell for under $300/sq. ft.

Lots in Las Campanas likewise reflect a deep inventory...and some terrific bargains. About 217 lots are currently on the market, mostly resales—a jump from 180 at this time last year. Because of some drastic price reductions, 35 lots have sold year-to-date (developer and resale), 22 of them between $150,000 and $300,000. This compares to only 14 sales for the first six months of last year. As Las Campanas recently devalued its Equity Golf Memberships from $150,000 to $90,000 in order to reduce its membership inventory (about 98 memberships have been turned back to Las Campanas for resale), the consequences to sellers who package their lot with an Equity Membership might mean more downward pressure on prices.

In Eldorado, 115 homes sold through the first six months, compared to 107 last year at this time. The median price jumped 17% to $324,000 from $275,000 for the first half of 2004. As of this date, 58 homes are on the market at an average price of $385,000 Lot sales were 8 for the first half of the year, compared to 18 for the same period last year, reflecting a dwindling supply (5 lots are currently on the market) and ever higher prices (some are now priced above $150,000). The average lot sold for $115,375 for the first six months of this year, a 23% spike from last year where the average sale was $93,563.

Other healthy areas in and around Santa Fe include Rancho Viejo, the Highway 285 corridor, Pecos, Zocalo, and Aldea, reflecting the sweet spot of the market between $350,000 and $600,000, pulling in both local and out-of-town buyers. Choice land, such as riverfront property in Pecos or close-in view lots in Bishop’s Lodge Estates, is also selling briskly. In addition, Pojoaque, Nambe and Española, traditionally characterized as “hard to move” areas, are suddenly active as prices have not kept pace with Santa Fe and are now regarded as opportunity markets.

The following tables represent sales for 1) the second quarter of 2004, and 2) the first six months of 2004, as reported to the Santa Fe Association of Realtors.

Residential Home Sales Santa Fe City and County

Residential Home Sales Santa Fe County only

Land Sales Santa Fe City and County

Land Sales Santa Fe City only

Land Sales Santa Fe County only

Residential Home Sales Santa Fe City and County

Residential Home Sales Santa Fe City only

Residential Home Sales Santa Fe County only

Land Sales Santa Fe City and County

Land Sales Santa Fe City only

Land Sales Santa Fe County only

Optimistically yours,
Michael French, President and Qualifying Broker
Pat French, Marketing Director
Liz Cale and Richard Jay, Qualifying Brokers
Alan Ball and Fred Raznick, Managing Brokers

*Statistics in this newsletter are taken from the Santa Fe Association of Realtors MLS data as well as from French & French Sotheby's International Realty and are deemed reliable but are not guaranteed.
**”Average price” is calculated by dividing total gross sales dollars by the number of sales. “Median price” is the price of a home or lot whereby half the sales are more expensive and half are less expensive.
***DOM means “days on the market”.
****These statistics represent the county and city of Santa Fe only and do not include Los Alamos, Española, Cochiti, Peña Blanca, and the extreme southern Santa Fe County communities of Edgewood and Cedar Crest.