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May 16, 2021 Is the Las Cruces home-price bubble about to burst?

Gary Sandler

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Published 16 May 2021

It’s no secret that home prices have been rising at a record pace. The question is how long can the meteoric rate of increase be sustained? Consumers are asking the same question. “In the first week of April, U.S. search interest in the phrase “when is the housing market going to crash” jumped 2,450 percent compared to the previous month, and is now more popular than any time since 2004”, according to Google.

Closer to home, data pulled from archives of the Las Cruces Association of Realtors on May 10 indicate that the median sales price of existing single-family homes declined in February and March before rebounding in April. January’s median price of $222,000 was a $35,750, or 19.2 percent, increase over the median price posted a year earlier. The median price fell to $220,000 in February, then declined to $216,900 in March before rebounding to $240,500 last month.

The year-over-year Las Cruces-area rate of appreciation also declined in February and March, falling to 17.6 percent and 6.3 percent, respectively. The trend reversed itself in April when the median price jumped by 23.3 percent over the median price reported one year ago. That wasn’t the only metric that posted declines. In its weekly survey dated May 5, the Mortgage Bankers Association reported that the number of mortgage applications fell for the second straight week before rebounding this week.

So, how strong is our local market? With just 155 single-family residences for sale as of May 10, competition remains keen. Recent statistics indicate that just under sixty percent of buyers paid the sales price or higher in order to prevail over other buyers competing for the same home. The list price to sales price ratio also increased, rising to 100 percent from 98 percent one year ago.

Based on the number of sales currently pending, record sales numbers are poised to continue into the months ahead. The 464 new and existing homes, townhomes and condominiums awaiting closing as of May 10 is the highest number ever reported and roughly two times the normal number of under contract transactions typically reported in the past.

So, what’s the bottom line? No one knows for sure. Fears of higher mortgage rates ahead, coupled with proposed changes to the capital gains rates, have raised questions that are difficult if not impossible to answer at the present time. Numerous pundits and financial analysts have commented that they don’t believe markets will crash as they did during the great recession, but instead will decline at a pace that will result in a “soft landing” if prices do decline. Let’s hope they’re correct.

See you at closing.

Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or Gary@GarySandler.com.

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