This is the first column of a two-part series.
To say that residential real estate is changing is perhaps an understatement. In a July 20 press release, the National Association of Realtors reported that sales of existing homes “have declined for the fifth straight month.” Specifically, sales fell 5.4% between May and June and 14.2% year-over-year. NAR also reported that the national inventory of existing homes is on the rise.
Nine days later, the US Census Bureau released statistics showing new home sales fell 8.1% between May and June, and 17.4% year-over-year. Interestingly, the new home stats are based on when purchase agreements were signed, while the existing home numbers count completed sales where purchase agreements were signed 30 to 60 days before. The reports also revealed that price appreciation is slowing in many parts of the country.
Las Cruces is not immune to the effects of higher mortgage interest rates and other economic factors on sales of new and existing homes, townhouses and condominiums. According to an Aug. 2 report from the Las Cruces Realtors Association, leading indicators show how sales in the Las Cruces area are being affected. Take, for example, the percentage of the asking price received by sellers. The list price/sale price ratio reached in July was 1.5% lower than the percentage reached in June and 0.5% lower than the percentage reached a year ago. Other statistics confirm that change is indeed underway.
Days on market, which reflects the number of days between the day the ad was activated and the day the purchase contract was signed, increased by 50% month-over-month and 80% year on year. Absorption rate, which measures the number of months it would take to clear inventory at the current rate of sale, was up 9.5% month-over-month and 12.2% one year to the next.
The percentage of unsold inventory is also on the rise, rising 40% between June and July and 10.5% year-over-year. LCAR also reported that the dollar volume of homes sold in July was 8.9% lower than the dollar volume reported in June and 15.1% lower than the total sales volume reported in July 2021. The dollar volume of July was $60,332,774.
There is no doubt that inventory is increasing, sellers are receiving a lower percentage of their asking prices, and it is taking longer to find a buyer. But what about values? According to national statistics, it appears that they have peaked in many parts of the country. Is it the same for Las Cruces? Have prices peaked in many parts of the valley? The answer is complicated and depends on the type of property, its condition and its location. While there aren’t enough buyers in the market to buy all of our inventory, there are more than enough to buy the small number of “best for the money” homes our inventory has to offer. . In this area, sellers continue to hold an advantage.
There’s one statistic that on its own doesn’t establish a trend, but could indicate what’s to come for local home values if it continues. This statistic is the median selling price. The median sale price is where half sells for more and half sells for less. While the median July sale price of $289,500 was 5.6% higher than the median sale price reported in July 2021, it was 3.4% lower than the median June price of $294,300. If this trend continues, it would indicate that local home values are falling.
So, suppose local home values soften. What strategy(ies) should sellers use to get the highest possible price for their properties? I’ll have the answer for you in next week’s column.
Meet at closing time.
Gary Sandler is a full-time realtor and president of Gary Sandler Inc., real estate agents in Las Cruces. He loves answering questions and can be reached at 575-642-2292 or [email protected]