Fannie and Freddie and You and I

Following the 'take over' of the two mortgage giants, rates have fallen off the table. All the Fed's previous rate cuts are now acting on mortgage rates. That was the intention when the cuts were announced, of course. Rates did not fall due to fears of ongoing instability in the credit markets. (Which of course did happen.)
Now that we have stepped in to bail out Fannie and Freddie, we may see lower rates for awhile. Hey -- why not? We (all of us taxpayers) will be paying for the carnage... we might as well get something out of it.

We'll see...

Forbes Magazine has been a consistent booster of Albuquerque and the latest comment from that direction is no exception. Job growth is projected to be 1.6% through 2012 (no mention of when that will start) and housing starts are going to be on the upswing by 2009.

Flatlining

As I've been saying for months, we have missed the excesses of the subprime debacle. But our market is still very sluggish and there is a simple reason. Job growth is lousy. Unemployment remains below the national average but inches up every month. And job growth is essentially non-existent.

• NM unemployment was 4.1% in July -- up from 3.9% in June
• Albuquerque's figures are similar. 4.2% -- up from 4.0%
• Job growth state wide is just .9% for the past year and most of the gains are in the energy intensive area of Farmington.
• By contrast, Albuquerque's job growth for the past year is just about zero (.3%).

By far the biggest problem with our real estate market is a high inventory. No way are we going to reduce that with flat job growth.

Another Reason to Love New Mexico

I've been saying that our market looks pretty good to a lot of others. How would you like to be selling in any of these:

• -28.4% Las Vegas, NV
  -28.3% Miami, FL
  -26.5% Phoenix, AZ
  -24.5% Los Angeles, CA
  -23.2% San Diego, CA***
  -22.9% San Francisco, CA
  -20.2% Tampa, FL
  -17.4% Detroit, MI
  -15.4% Washington, DC
  -14.8% Minneapolis, MN

The above are the markets with the sharpest declines over the past 12 months. Not a Top-10 list to join!

Just Before the 'Fall'

Albuquerque's market was just beginning to cool off in the middle of last year. And, we were a few months from the financial markets melt down. So, looking at year-to-year for the 2nd quarter is interesting. It provides a pretty clear picture of the damage to our market caused by national events. All of the following compare April-June of 2008 vs. 2007:

• Average price: (3.09%)
• Sold properties: (27.83%)
• New listings: (25.67%)
• Days on Market: 71.79%

So, everything is negative but one -- Average Days on Market. But what remains remarkable to me is that in the current horrible national environment, Albuquerque performed the way it always has and avoided the excesses so apparent in other areas. (Would anyone like to try and sell a house in Phoenix?)

Good News in Low Numbers

Housing starts continue to decline in Albuquerque/Rio Rancho. And, except for the builders and their tradespeople, that is good news. A major difficulty with our market at the moment is too much inventory so fewer new homes can only help.

• Permits issued for the metro area (189 in June) were down 15.6% from May.
• By contrast, June of '07 saw 605 permits issued.
  

Back to the Future

Getting mortgage money has become much harder. That statement is true -- but only to a certain extent. What has really happened is that we have gone back to the type of lending practices that were the norm prior to the sub-prime debacle.

• Seller-assisted programs that allow the seller to provide the down-payment for the buyer will be phased out on October 1st.
• The number of investment properties a person may own and still get a conventional loan will be limited in the future.
• A good credit score and documentation are now the norm.

Of course, other programs aimed primarily at first-time borrowers are not changing too much.

• FHA will still allow gifts from the family to help a buyer with down payments and closing costs. The downpayment, however, will increase to 3.5% from 3%. And, the monthly MIP payment will depend on the borrower's credit score among other criteria.
  
• NM-MFA (New Mexico Mortgage Finance Authority) remains largely unchanged. A buyer whose income is within the guidelines will find this type of loan very attractive.
  

Staying Out of the Deep End

Economically, Albuquerque (and New Mexico) continue to do far better than the nation as a whole.

• June's national unemployment rate was 5.5%
• New Mexico's rate was 3.9%
• Albuquerque's rate was 4.0%

Housing, of course, remains a huge problem around the country and foreclosures are a big part of the reason. Here again, we are in far better shape than most. I don't have a break out specifically for Albuquerque, but New Mexico continues to rank near the bottom.

• In the second quarter, U.S. filings were up almost 121% over the second quarter of 2007 with 739,714 filings.
• In contrast, New Mexico had 1,150 filings state wide. That is a 60% increase over the same quarter in 2007 -- but a 2.7% decrease from the first quarter of this year.
• The states with the highest foreclosure rates: Nevada, California and Arizona all showed increases over the first quarter of this year.
  

Shadows and Substance

For the past decade, New Mexico has made a concerted effort to attract films and production facilities. In the last three to five years, that effort has started to pay off. The latest 'maybe-perhaps-sounds-good-if real' is the announcement that Masque Entertainment will built a studio with eight sound stages and post-production facilities in Rio Rancho. The film business is notorious for brave announcements that quickly dissolve but if this one proves to have some substance it will be a big additional step in making New Mexico a serious option for West Coast productions.

And, speaking of substance, New Mexico continues to rank close to the bottom in foreclosures. The latest RealtyTrac has us ranking 37th among the states. Nevada, California and Arizona continue to lead the pack with West Virginia, South and North Dakota happy to be at the bottom of this particular list.

Credit Market Still Suffering

Lots of not-so-good news on the mortgage front. Thornburg Mortgage, of course, has been the poster child for a well-run company that was caught in the credit fallout. Now, IndyMac has joined the list. On Monday, regulators concluded it was no longer 'well capitalized' but the company does not anticipate raising any capital in the current credit climate. Instead, it will cut about 53% of its work force and simply focus on servicing the loans it has already made.
Also yesterday, shares of Fannie Mae and Freddie Mac tumbled more than 18%. Lack of capital is again the culprit.