All real estate is local

Once again, January figures show sales down all over the country. But, Albuquerque and Rio Rancho continue to defy the national statistics. Yes, this market is slower but it remains far more stable than others. I'm still assuming we will dodge the worst of the problems. And that most of what hits us will be due to the national psychology more than local conditions.

No Change on Limits

The economic stimulus package now in place will not make a difference in Albuquerque and Rio Rancho, since all the loan 'caps' are based on local prices.

FHA limit is still $200,160
Conventional remains $417,000

Even for those areas that will see a rise, it will take a couple of months for the agencies to work out the numbers.

Albuquerque at Year's End

Just finished writing my Market Update for the whole of '07. Looking forward, the big questions remain:
Will our local economy trump all the bad news from everywhere else?
Will the loss of loan programs (the good ones!) significantly reduce the number of buyers?
As the time-to-sell stretches out, will sellers start reducing their prices?

I've been selling housing for more than 18 years now and I have never seen a market that is so contrary to local conditions.

It's the Psychology...

The famous mantra from the '92 election was, "It's the economy." Remembering that on every occasion propelled Clinton to the White House. Now, we have a screwed up national economy but a more-than-ok local economy in Albuquerque and Rio Rancho. It still remains to be seen which is more compelling in buyers' minds.

After 'The Game' -- the Market?

Bad years or good, traditionally the Albuquerque & Rio Rancho markets are slow from late fall to the end of the Super Bowl. So, now we will find out if a good local economy and very low interest rates will be enough to counter the national credit problems.

Why Albuquerque Keeps Ducking the Worst

I've been saying that New Mexico normally does better during economic downturns then the rest of the country. In fact, according to Lee Reynis, director of UNM's Bureau of Business and Economic Research, "We have almost never had a recession here.... Rarely does employment growth turn negative." If we were to follow the rest of the country into a recession, it would be the first time since the 1950's.

One other note: foreclosures in New Mexico were down 26% in 2007 vs. 2006. Just four other states followed our example: Oklahoma, Pennsylvania, South Carolina and Utah. At the other end of the spectrum: Texas, Colorado, Arizona and Nevada were among the top 10 in foreclosures.

I said quite some time ago that we always seem to 'muddle' through. You are looking at a typical NM muddle :).

Some Facts & Some Theory

Unemployment for December continued to be very low in New Mexico and Albuquerque: 3.5% & 3.7% respectively. Both are a small 'uptick' from November but still well below the national average of 5.0%

New home permits were down a very large 60% from December to December. That is a big drop, of course but I consider it good news for everyone but the builders themselves. On the outskirts of Albuquerque and Rio Rancho the builders' excess inventory is slowing up individual home sales. When their inventory is sold off, then the re-sale market will come alive again in those areas.

And, speaking of inventory, that is the key to forecasts about when the market will turn around. Depending on the source, that will occur in the second or third quarter as confidence returns and inventory shrinks.

The Blame Game

Check out They Lied to Us for the bottom line on who did what during the credit debacle. Bottom line for me: the financial people were simply making too much money to pay attention. Does anyone remember Alfred E. Newman of Mad Magazine? His signature comment was, "What, me worry?"

Thinking About Albuquerque/Rio Rancho

OK -- if our local economy continues to be in good shape (income up, unemployment down and foreclosures moderate to low) why is that not reflected in the real estate market?

Caution about the economy?
Fear of buying at close to the top of the market?
Lack of mortgage programs?
Too many choices?

Something else?

Let me know your thoughts....

The Fed Reacts -

- and so do rates in Albuquerque.

After the Federal Reserve lowered its funds rate by .75%, mortgage loans were at 5.625% in Albuquerque. That is almost as low as the historically low rate of 5.5% from a couple of years ago.

So, with a strong local economy and very low interest rates, we'll see if buyers come back into the market.