Published 1 March 2020
An acute shortage of homes for sale in the Las Cruces-area is frustrating home shoppers in all price ranges, according to a Feb. 24 report from the Las Cruces Association of Realtors. As a result, many buyers are choosing to offer the asking price or more in order to prevail over other buyers vying for the same properties.
How acute is the shortage? As of Feb. 24, a total of 435 new and existing homes, townhomes and condominiums were listed for sale in our local multiple listing system. Of that number, just 417 were free-standing, single-family homes. To add a little perspective to the number, our local inventory reached its peak of 1,745 homes for sale in 2007.
How many buyers are offering the asking price or higher for their homes? We need only look to January’s home-sale statistics for the answer. According to the data, 31% of the buyers whose transactions were one of the 119 that took place during the first month of the year fell into the “at or over” category. Just under 21% of the buyers paid full price for their homes, while slightly more than 10% offered more than the asking price in an effort to freeze out their competition.
How much over the asking price did those buyers offer? On average, they forked over an additional $3,040. One lucky buyer needed to sweeten the pot by just $100 to triumph over his competition. In the most competitive purchase, the buyer paid $7,125 over the asking price.
Given the fact that there are more homebuyers in our marketplace than there are “just the right homes” to purchase, it’s no surprise that the supply and demand imbalance is exerting upward pressure on prices. An easy method of gauging the current and future direction of home prices is to track the percentage of the asking price sellers receive at the time of sale. In a balanced market, sellers typically attain in the neighborhood of 96% of their asking prices. Today, in Las Cruces, the average is closer to 98%t and trending slowly upward.
To what extent has the imbalance affected home prices? This January’s single-family home average sales price of $228,647 represented an increase of $18,577, or 8.8%, over the $210,070 average price recorded in January of 2019. January’s median sales price of $197,000 was also an improvement over last year, exceeding by $6,200, or 3.2%, January 2019’s median price of $191,800.
The Las Cruces-area shortage of inventory is not unique, according to the National Association of Realtors’ existing home sales report released on Feb. 21.
“The housing inventory level for January is the lowest level since 1999”, said Lawrence Yun, NAR’s chief economist. “Existing home sales are off to a strong start at 5.46 million. The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales.”
In addition to Dr. Yun’s observation that housing starts are increasing, meaning that builders are ramping up production to better meet buyer demand; an improving economy, rising wages and mortgage rates projected to remain at or below 4% throughout 2020 will also contribute to additional sales this year. Sales are not projected to rise quickly, however, as the building of new homes typically progresses at a pace that’s chiefly determined by builders with an eye on not overtaking the demand.
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