Published June 6, 2016
What a difference a few decades can make. From the time I relocated to Las Cruces in 1993 until the mid-2000’s, sales of new and existing Las Cruces area homes, townhomes and condominiums plodded along at a humdrum pace. Our local listing inventory contained just over 300 new and existing homes, values were appreciating at around 4 percent annually, and new-home sales accounted for approximately seventeen to eighteen percent of the total number of closings. Then everything changed.
Congress authorized Freddie Mac and Fannie Mae to purchase mortgage loans made to just about anyone who could fog a mirror, igniting a fire under our nation’s housing market. Buyers came out of the woodwork, causing the demand for housing to outpace the supply. Enter the builders.
Subdivisions sprang up all over town and new-home construction was off and running. First-time buyers were purchasing almost half of the available homes, while investors were snapping up almost 40 percent of the inventory for rentals, second-homes and vacation getaways. By late 2007, our listing inventory had ballooned to almost 1,750 homes. Then everything changed, again.
The housing market peaked and began its downward descent. Builders curtailed their efforts and began focusing on reducing their inventories of unsold homes. Homeowners who thought they could cash in on the hyper-appreciation created by the buying frenzy began to realize that they’d be lucky to sell at all much less make a profit. As a result, inventories of new and used homes began to shrink.
As of May 27th of this year, statistics from the Las Cruces Association of Realtors (LCAR) showed that our local inventory contained just 837 new and existing homes. That’s a 48 percent reduction from the 1,745 properties for sale when the inventory peaked at the end of the same year.
Site-built free-standing single-family homes make up the bulk of our current stock, with 774 units currently listed for sale. Townhome offerings add another 48 units, with 15 condominiums rounding out the total number of properties for sale. Mobile and modular home offerings add an additional 59 units to the mix.
Through the first four-months of this year, local Realtors sold a total of 465 new and existing homes, townhomes and condominiums. Eleven of those units were townhomes, 13 were condominiums, and 441 were free-standing homes. Forty-eight of the closings were for newly constructed homes.
Also during the first four-months of this year, LCAR reported sales of 67 parcels of land, six multifamily properties, and two commercial/industrial assets.
March and April are typically the months when sellers who want to move over the summer list their homes for sale, which increases the size of the inventory. Those months also mark the beginning of the time buyers begin entering the marketplace. If the number of new listings outpaces the number of new buyers, the supply of homes will outpace the demand, exerting downward pressure on prices.
If the number of buyers entering the marketplace outpaces the number of new listings added to the inventory, the added demand will result in higher prices. I can’t wait to look back a few months from now to see which scenario prevailed.
See you at closing.