April 2010 Newsletter
Finally a bit of good news to report; March 2010 monthly sales figures are above February 2010 and also above March 2009. That only happened in 4 out of 12 months last year and none of the previous 24 months (in ’08 or ’07). So yes, that’s kind of a big deal. And the First Quarter home sales chart (included in this letter) shows a measurable increase in the category up to $500,000 for the first quarter 2010 versus the same quarter 2009. We can thank the first time homebuyer tax credit program somewhat for that increase. But is also is likely attributable to buyers and sellers in that range being bold enough to decide to buy or sell despite the mixed up and unpredictable marketplace. Even without the tax credit, we should expect some increase in that range. Those buyers and sellers are rarely in a position to wait. If they need to sell or need to buy, they usually can’t sit back to watch or hesitate, compared to a prospective buyer or potential seller in higher price ranges. Certainly there are many that need to sell in all price ranges. It’s just that under $500,000, I believe those with a real choice are a much smaller percentage. And let’s not completely ignore the better prices and values that buyers are finding these days. Examples abound of a specific property selling in 2008 or 2009 that may now be available for less. What some sellers wanted last summer is probably now even lower. That’s what buyers are seeing and acting upon. My 1st Quarter home sales spreadsheet follow.
The struggling Santa Fe residential real estate market is such a large part of our local economy that nobody can really measure the widespread negative effect on Santa Feans. For several years, the only real form of good news materialized as “no more bad news”’. Despite the accumulation of losses the bursting bubble of real estate ushered in, we have reasons to think the worst is over and the recovery is well underway. But please be patient. Just 4 or 5 months ago, there was real fear that we would have a double dip recession, meaning the all time lows we experienced around the end of 2008 might be repeated a year or more later. Now the experts seem to think the likelihood of that is less than a 10% chance. The most common description I am able to decipher is that we are in a modest recovery. That means nothing fast and furious, nothing spectacular, no overnight cures or obscene instant fortunes being made. It’s simply a time of hard work and our collective shoulder to the wheel. We will have to collectively earn every step we take, without a tailwind and with too little confidence to start running again.
Are you enjoying the well-worn references to spring right now; from “hope springs eternal” to “April showers bring May flowers”? My saying is somewhat plaintive and small in focus, yet allows a sweeping generality to lodge in one’s brain. I quote that old folk singer Bob Dylan who wrote “funny, how the things that are the most difficult to part with are the things we need the least.” So why stop with spring cleaning and a garage sale? Why not go further and change addresses? Find a new place to wake up every morning and a new sunset view to brag about. I submit it would be fantastic if just 5 percent of us sold the home we now live in and bought another home. What’s the quick math here? Maybe start with 10,000 homeowners (nice round number), so 5% of that is 500. And if all 500 were willing to be both a seller once and a buyer at least once, that’s maybe as many as 1,000 deals. What? 1,000 transactions? Well, let’s lower the estimated count to 750 transactions, since some deals will count as both a sale and a purchase. And let’s spread those out over the next 6 months. In this example, these are new deals beyond what would happen anyway. These are 500 homeowners willing to make a difference, to step forward and do something constructive and meaningful. So if you can imagine 750 transactions added to some number, what is the total # of sales that usually occur in the 6 months period that covers April 1 to September 30th? For 2009, that number was 647. And I am proposing we double that number. All it takes is those 500 people to be willing and able. Who can I count on? Who is in?
Think of the consequences of that many people adding their sale or purchase to the volume of sales we would do this year. What are the effects? Let’s take the surveyors first. My rough guess of the average cost of those additional 750 surveys would be at $600 each; times 750 for a total of $450,000. That’s new money circulating in Santa Fe. Now let’s throw in some appraisals, with an average cost of say $450 (times 750) and we can add another $337,500 to the amount of new money flowing around town. Next would be my long time compadres in the Realtor community. If there were an additional 750 transactions, I bet a dollar the average commission would be, all things considered, at least $17,000 per. That times 750 is a neat and tidy $12,750,000. Whoa! You say? How did we jump into the millions? That guess uses just below an average sales price of $350,000 and an average commission of 5 percent. I know, many Realtors are worth 6 or 7% and some are only worth 3 or 4%, so it balances out. The surveying and the appraising work will help, but now we are in the millions. But those estimated commissions are peanuts when you calculate what would happen with those 500 people participating in 750 transactions. If commission and all other costs add up to say 7% of the total sales price, that leaves 93% to count. If the average is correct ($350,000) and the number count is correct (750 new transactions), then what is the math on that? Try this out: $262,500,000. Let’s not forget to take out the 7%. Well, we still have $244,125,000. Where does this money go? Some goes into the next home. Some pays other people involved in the sales process. Some has to go to pay off mortgages, of course, and some credit card debt will get paid off. And some goes into savings. But you just know there would be a run on flat screens and landscaping materials; all purchased locally if not manufactured locally.
It’s true that some of the buyers of this new business will need to borrow money. We hope they borrow locally so as to employ someone locally and continue to circulate the money around the community we live in and love. But where is this going? What’s the point of all this? It is quite interesting how far, or how close, we are to participating in a thriving economy again. With your imagination, I am certain it occurred to you that people would return to their dentist sooner, buy those new slacks and have that manicure you owe yourself. Each time you spend money, it comes back over and over, circulating in Santa Fe, employing more people, giving residents of Santa Fe a stronger grasp on their own future.
Am I suggesting we actually take money out of our own pockets and help someone else? No, not at all. I am simply saying you could help yourself to a new home address. You could take what you deserve and move up or move down as your needs and wants indicate. Make an appointment with a Realtor today. Well, first maybe talk to a mortgage lender, OK? Then look at what is for sale online, to educate yourself on the market. Then call a Realtor. Then call me.
So let’s play what if… what if some of these things happened? What would you say was your part of the process? When your grandchildren asked you “what did you do to fix the local economy, grandpa?” your answer could be anything you want it to be. Tell the grandkids your truth. Let them look at you with respect and admiration for your hard work and vision.
Alan Ball AlanBall2@gmail.com