The housing market cools off

New Mexico Business Journal, March, 1998 by Nancy Traver

Many Albuquerque residents shake their heads in disbelief when recalling the white-hot real estate market of only a few years ago. Homes sold in a matter of days - or hours. Some sold before they were even formally put on the market. Often, sellers never bothered to engage a Realtor; instead, they confidently stuck For Sale By Owner signs on their front lawns and waited for their closing date.

Those go-go days of 1994-1995 are gone - not only in Albuquerque but all over the state. Home sales were down in 1997 from 1996. Also, construction of new homes dropped in much of the state, with Albuquerque posting a 7.5 percent decline and Las Cruces experiencing a steep 20 percent decrease last year from the 1996 level. New home construction was down in Santa Fe. Alamogordo saw an increase linked to the 300 incoming German personnel Holloman Air Force Base. Roswell continued to hold its own, as the dairy industry there remained strong. Rural areas, such as Clovis and Portales, stayed the same and Farmington saw only a little growth.

"We're not growing at the same rate we were a few years ago and the largest factor in the slowdown is a drop in job growth," says Mike Sivage, president of Sivage Thomas Homes. "New jobs really drive the economy, and that's particularly true for new housing."

Sivage pointed to a similar softening in the housing market nationwide. He says New Mexico is keeping pace with other mountain states, which reported moderate slowdowns in 1997. Some of the dip here is related to California's improved economy. In the past, New Mexico's growth was due in part to California's migration; now that California is beginning to recover, fewer people are arriving.

Still, real estate agents and developers in many parts of the state agree that the New Mexico housing market has remained steady, if not as robust as a few years ago. Jim Maddox, president of the Albuquerque Board of Realtors, pointed to the almost microscopic drop from 1996 to 1997: only 11 fewer single family homes were sold last year. That's a decrease of only .5 percent. "There's steady growth in Albuquerque and a healthy economy here and that has kept things moving along," says Maddox.

Peter Parnegg, president of the newly merged Coldwell Banker Parnegg Metro, now the largest residential real estate company in the state, says consumers are in a positive mood. "While we have a significant inventory of homes for sale, there is also a good availability of buyers. Home values are static, without a lot of inflation or deflation - no greater than 1 or 2 percent," he says.

Leaders in the housing market around the state point to several factors that have kept the industry strong and will continue to move sales in 1998. Interest rates are favorable, and there are very few signs those rates will increase. The nation as a whole is enjoying low inflation - only about 3 percent - and healthy job growth, with unemployment at 4 percent. David Wesley, project manager for the Roger Cox and Associates' 3,6$0-acre Paa-ko development in Albuquerque's East Mountain area, says, "We see a lot of influx of what we call fax-muters - people who don't have to commute to an office everyday and can be based anywhere. This is a reflection of a healthy national and local economy that is more high-tech based."

Besides this thriving national economy, the housing market has also been helped by beneficial changes in the federal tax code. Under a bill signed into law last year by President Clinton, home sellers have been granted increased tax immunity from the sale of their personal residences. They can now sell a house they have owned for as little as two years and pay no capital gains taxes. Says Peter Parnegg: "That's a huge difference. The government has promoted home ownership as a financial activity."

In outlying parts of the state, those in the housing industry report that national mood of confidence is shared in each locale. Silver City Realtors report a 25 percent increase in the number of single family homes sold in 1997 over the previous year; the average purchase price also jumped from $92,000 to $98,000. Kim Clark, executive officer of the Silver City Association of Realtors, says, "The economy is really good here - there are a lot of new restaurants and hotels. That's because Silver City is being promoted as a retirement community."

The town also got a dose of national publicity last summer,. when the Oprah Winfrey Show dubbed it the Best Small Town in the U.S. Its dry, moderate climate, proximity to recreation in the Gila Wilderness, low cost of living and neighborly, small town atmosphere pushed it into the No.1 spot.

Taos saw a 15 percent drop in home sales in 1997 from the previous year, reports Diane Enright of the Taos Association of Realtors. But during the last quarter of the year, sales were up 50 percent over the same period of 1996. Enright says the Taos area is still recovering from the forest fires of two years ago, coupled with the drought that struck the ski industry in the winter of 1995-1996. "And when Santa Fe slows down, we slow down," she says. "We get their overflow, and we're not getting as much now from Santa Fe."