Market slowdown has been beneficial to buyers

David Collins | The New Mexican

4/13/2008 - 4/14/08

Some Realtors and affordable-housing sellers say a dramatic slowdown in housing sales so far this year resulted from a market correction that can be good news for prospective buyers looking for affordable housing.

Home sales throughout the city and county reported to the Santa Fe Area Realtors Multiple Listing Service in the first quarter of 2008 dropped to the lowest number in at least 10 years. Along with sales volume, median prices also dropped.

At $490,000, the first-quarter median price in southeast Santa Fe County matched a record set one year earlier, but in the Eldorado subdivision, as in most areas of the city and county, the median sales price fell. The Eldorado median fell to $349,000, the lowest in that area since the first quarter of 2005.

Realtors' proprietary data, however, showed only slight increases in the portion of available Eldorado homes that didn't sell during the quarter, compared to the first quarter of 2008, along with only slight increases in the time houses stayed on the market and in the spread between asking and selling prices.

"The reason for the $349,000 median price is you saw a rash of the lower-priced homes in Eldorado being snatched up," said Realtor Fred Raznick, a Sotheby's International Realty agent who lives in Eldorado and until last year worked out of an Eldorado office.

Abundant sub-prime credit available to speculative buyers fueled record prices of the past year, when the median selling price in the city and county peaked at $450,000, Raznick said. Each quarter of 2007 brought new city-and-county-wide records for that quarter, but as in Eldorado, the overall area median in the first quarter of this year — $353,900 — fell to a mark unmatched since the first quarter of 2005.

"From an affordable buyer's perspective, it's a great time to buy a house because houses within the (Multiple Listing Service) become within reach of affordable buyers," said Elizabeth Martin, special projects manager at Homewise, a nonprofit affordable housing program in Santa Fe.

Like Raznick, Martin called this year's dramatic turn in the real-estate market a correction. The seemingly endless upward price spiral had troubled some agents.

"I was embarrassed when people would call me and say the prices are going up again," said Robbie Dobyns, a Realtor at Santa Fe Realty Partners.

Raznick said investors in the past year or so started selling properties bought on adjustable-rate mortgages when rates increased. Some owners could no longer meet mortgage obligations with rental income, he said.

Other sellers simply stayed out of the market. In Eldorado, "there wasn't much inventory," Dobyns said.

The slowdown has shifted opportunities for buyers who seek financing help from Homewise, but affordable-housing efforts that depend on subdivision developers' setting aside a portion of new inventory as affordable could suffer from a continued slowdown, said Daniel Wreath, resource-development manager at The Housing Trust in Santa Fe. The trust works with developers to build affordable homes promised with new development plans.

"Where it really affects us is there has been a slowdown in new construction," Werwath said.

Werwath said he expects the local real-estate market to recover, but never to regain the exuberance of recent years that drove median prices to record highs. While most affordable-development strategies in Santa Fe for the past decade have taken advantage of momentum from new development, Werwath said a continued slowdown could motivate affordable-housing advocates to explore new strategies.

"If the market continued to slow down, I would be looking at things like the land trust, or buying existing homes, rehabilitating them and selling them to affordable buyers," Werwath said.

The Housing Trust has developed an equity pool it uses to build new affordable houses. That equity would be sufficient to continue building new units, but without the revenue the trust earns from building affordable homes for new market-rate developments, other sources of income could become more important.

Werwath said recent affordable housing ordinances in the area have only targeted subdivision developers. He has advocated a transfer tax when homes are sold, which could require builders of single high-dollar homes to share the cost of building affordable homes.

In land-trust arrangements, which The Housing Trust has used in about 90 of some
450 units it has built in Santa Fe, the trust retains title to the land while residents own the homes they buy. The arrangement allows the trust to buy back the homes at a controlled price, but Werwath said the arrangement doesn't afford the same pride of ownership as simple house purchases.

More often, The Housing Trust prefers to subsidize purchases with a second mortgage, along with an agreement that lets it buy back a house at an appraised market rate. Since the second mortgage assigns half the profit in a sale to the trust, the group can earn revenue for future development while affording some protection against spiraling prices. Werwath said the trust's best efforts stand little chance of stopping price increases in a rapidly increasing market such as Santa Fe realized until early this year.

Contact David Collins at 986-3064 or dcollins@sfnewmexican.com.