It might be hard to believe, given the recent downturn in the local real-estate market, but a national news report predicts Santa Fe will be among the top 10 housing markets in the U.S. over the next decade.June 10th, 2009
Bob Quick | The New Mexican
The prediction came in a recent story on usnews.com, the Web version of US News and World Report. Researchers said they expect the Santa Fe real-estate market will grow at a rate of 3.6 percent annually through most of 2018.
Most of America’s real estate markets overall will appreciate during the next 10 years, some more than others, Mark Zandi, chief economist at Moody’s Economy.com., said in the report.
Moody’s Economy based its forecast on employment and population data, as well as geographic and industry trends.
Unlike most other cities in the top 10, Santa Fe lacks an industrial base to boost the city’s economy. But other factors could be at work.
Among the reasons for optimism about Santa Fe?
The community’s 300 art galleries and dealers and the estimated 1 million visitors who come to Santa Fe every year, “making tourism a key component of the local economy,” the article stated.
Real-estate brokers were delighted with the prediction, including Mary Schroeder, president of the Santa Fe Association of Realtors, though she was a little cautious.
“That’s actually good news,” she said. “I haven’t seen that about Santa Fe before. The news is usually about Albuquerque. I get tired of hearing about Albuquerque.”
Santa Fe isn’t seeing that 3.6 percent growth rate just yet.
In the first quarter of 2009, according to the Santa Fe Association of Realtors, the rate of growth was about 2 percent in the city of Santa Fe, with the median sales price rising from $301,500 during the first quarter of 2008 to $308,000 in the same period in 2009.
In Santa Fe County, the result was not as good. The median sales price dropped from $480,000 to $440,000, a decline of 8 percent.
“The biggest thing we need to do over the next 10 years,” Schroeder said, “is to reduce the supply of homes for sale. In some neighborhoods, we’ve got several years’ supply. There are thousands of homes on the market. We’ve got to get rid of that inventory. That will make a big difference in our pricing.”
Once that happens, “I think people will wake up,” Schroeder said. “They’ll be wondering, ‘Oh my God? Did I miss the bottom?’ And then go out and buy a house.”
The market also will be affected by the slowdown in new construction, Schroeder said. “If they’re not building anything new, resales are going to go at a higher price. I think that will have a positive impact on the market.”
People also will buy homes in Santa Fe because of the air quality and because they want to live in a town where green building is a priority, Schroeder said. “We could be a model city for those kind of changes.”
Santa Fe also has the advantage of being considered free of such natural disasters as earthquakes and hurricanes. “It’s pretty safe here,” Schroeder said. “The more people realize what a safe haven Santa Fe is will help with people retiring here,” she said.
The only problem is that Santa Fe is not as cheap as other places to live, she added.
One government program helping sales is the federal income-tax credit of $8,000 for first-time home buyers.
“It helps a lot,” Schroeder said. “My son used it to buy a house in Las Cruces. He was thrilled with that.”
Alan Ball, publisher of a quarterly real-estate newsletter and general manager of Southwestern Title & Escrow, also was glad to the forecast for Santa Fe’s real estate. But he was hesitant about predicting the course of real-estate prices over such a long period.
“I might take a stab at one year,” he said. “Much less two or 10 years.”
Ball added: “I can’t imagine us leading anything nationally since we’re such a small MSA (metropolitan statistical area). But I think it’s possible. The good news for us is that we didn’t have the runaway appreciation some cities had and therefore we don’t have the crazy drops in housing values that other places did.
“We also didn’t have the large number of foreclosures. In some markets, 3 to 5 percent of the homes are bank-owned. The stability here is really nice.”
Ball cautioned, however, that trends toward government forcing builders to provide affordable housing are “prohibitive for normal development” and “will put a wall around the city.”
Rising incomes will be necessary if residents are going to buy homes in Santa Fe, and New Mexico personal income growth is expected to be 2.2 percent in 2009, 2.7 percent in 2010 and 4.5 percent in 2011, according to Mark Boyd, an economist with the state Department of Workforce Solutions.
“It’s hard to know how things will turn out,” Boyd said. “But all the forecasts see us getting back on the track we were on” before the recession hit. “Perhaps with a few lessons learned.”
PICKED TO UPTICK
A list of cities and projected annual percent change in home prices from the fourth quarter of 2008 to the fourth quarter of 2018:
1. Bremerton-Silverdale, Wash.: 5.22 percent
2. Glens Falls, N.Y.: 4.71 percent
3. Fort Collins/Loveland, Co.: 4.06 percent
4. Corvallis, Ore.: 3.95 percent
5, Anchorage, Alaska: 3.8 percent
6. Duluth, Minn.: 3.74 percent
7. Sandusky, Ohio: 3.66 percent
8. Santa Fe: 3.57 percent
9. Pittsfield, Mass.: 3.51 percent
10. Decatur, Ill.: 3.44 percent.