The Santa Fe High-End Market for 2006
Page 2

2.4 And Now for Some Numbers
  You will note that there has really been little change (with few exceptions) in the market in terms of the percentage of homes that sell in two of the three brackets I have chosen to study. Change did take place in the $750,000 to $999,999 bracket. There, we have seen the usual increase in both the number of homes available in that price range, and the number of sales.
  More importantly, the percentage of sales actually increased at a greater rate than inventory and sales increased. The 43% absorption rate is the highest it has ever been in this price range.
  We know the market below $750,000 is very strong in Santa Fe, so the news on the $750,000 to $999,999 front is encouraging.
  This shows the acceptance of the $750,000 to $999,999 bracket as a more “acceptable” price for many buyers looking for what they consider the “right” home in Santa Fe.
  In the $750,000 to $999,999 bracket, the figures for listings and sales are simple extensions of what has been happening here since 1998; it is the increase in the percentage of homes being sold that is the most interesting number in this study.
  Above $1,000,000, the Year 2004 was virtually a maintenance of the status quo for both the $1,000,000 to $1,499,999 bracket, and the over $1,500,000 bracket.
  Over $1,500,000, there was a continuing extension of the listings and sales, but the sales themselves were exactly in keeping with the last fifteen years in terms of percentages of homes sold (absorption rate). Over $2,000,000 the sales exploded into the best year we ever had.
  My conclusion is that the $750,000 to $1,000,000 market is stronger because of an acceptance of the simple fact that “this is what it is going to cost to get started in a ‘nice’ home in Santa Fe.” Much of this acceptance is because our land and building costs keep increasing and buyers want more and more “features” in their homes.
I have long maintained that the “market” for over-$1,000,000 homes has been steady for years. It just never gets very high in terms of absorption.
  I base this analysis of “steady” on the percentage of absorption, not just a recitation of increasing listings and sales, because absorption tells you what chance a seller has to sell in the given year. Conversely it shows a buyer what chance they have to find the right home from our inventory.
Note, too, that while more people are moving here as shown by the number of sales, there is probably an even larger number of people moving here who choose to have a custom home built. Custom home owners thus do not enter into these tables because they never buy an existing home.
  When these custom owners sell they add to inventory - without having shown up previously and concomitantly as a “sale.”
  Therefore, they add to inventory when they sell and seemingly “come out of nowhere” from a statistical point of view. That is one reason, along with spec. homes, that our inventory keeps growing fast enough that the buyers don’t eat into the inventory as quickly as many would like.
Note, that the average sale in this sampling still took over two years of marketing time (which has been the case since I hired a researcher in 1993 to go through sales and find out when they originally came on the market). MLS statistics are woefully inaccurate in this area due to how the homes are tracked and due to the exigencies of a Realtor providing the best representation for their seller.
  Good representation of sellers means agents are going to “re-list” existing listings of theirs, while also not reporting prior days-on-the-market when a listing changes agents. Thus, the days-on-the-market statistics as reported in MLS have an extremely large margin of error - which my study and continued sampling says is an error range of over 100%. That’s a large error, wouldn’t you say?
  If you are not an agent, here’s what the paragraph above means. It is not uncommon for an agent to withdraw a listing and re-list it as a new listing a week later. When most agents become the new agent for an unsold listing another agent lost, then the new agent does not list the previous history of the home being on the market when they turn in what for them is a “new” listing.
  Agents take these steps on behalf of themselves and their sellers because if a listing goes in as “new” its gets a special position in the MLS Hot Sheet, and calls more attention to itself. With the 1992 advent of Buyers Agency, listing and selling agents really have different loyalties and those who protect their sellers do all they can to put their listings in the best light.
  In the cases above, “new” listings drop their history in MLS and so price changes and days-on-the-market start fresh, with all their past history wiped out.

2.5 How the Ultra Upper End Fared
   At the next highest level, there were 23 sales of listed price properties in the $2,000,000 to $2,999,000 range, vs. 68 listings, for a 34% absorption rate.
   Higher still, we had 6 sales of properties over $3,000,000, vs. 31 listings, for an absorption rate of 19%.
Thus, 29 properties, out of 99 listings, sold over $2,000,000, or 29% absorption.
My conclusion is that over $1,000,000 we are still subject to the following rules of the road for selling Santa Fe real estate:

1. There are a limited number of buyers for re-sale and spec. homes who want to live here, but that absorption number is extremely steady in terms of our growth.
2. Relative to the inventory, the number of buyers is roughly in the same percentage of the inventory virtually every year over $1,000,000. At the same time, there is a growing acceptance of the $750,000 to $1,000,000 market in terms of listings, sales and absorption, so we will have to see if bracket creep starts to move into this above one million range.
3. The market is relatively thin and normal selling time is two years. The percentage of asking price realized is a private analysis I do for specific properties and clients. Reported MLS statistics can be argued to be off by over 200% in this area.
4. Buyers have a large choice of inventory, no time pressure to move here, and will simply wait until they find what they want. In many cases, price has to be adjusted by the seller even if the seller has a desirable home.
5. Many homes are dated enough that they may never sell without huge price reductions, some on the order of 50%.

  Tastes have changed and this market study can be further broken down by age and location of the properties. I do this analysis for clients only. This study you have is an overall picture of our local market. Within that market are at least five or six geographic divisions and at least three age divisions.
  As they say on TV, “Don’t try this at home.” I can’t emphasize enough that each individual property has to be evaluated for, among other facets for: its age, location, features, floor plan, style, price, etc.
   Initially, during the entire period of this study, we have had 1190 total sales over $750,000 vs. 3819 listings, for total absorption rate of 31%. Like a good doctor, lawyer, broker, or plain old friend, I will tell you the truth as the market presents it.

  At the end of what may seem at times discouraging letter please let me convey that I love living here. For me, the outdoors, restaurants, quality of light, and people are all wonderful. I enjoy selling property here and I know I can sell yours. But to ignore the realities of a market is something I can’t do because it means disengaging my eyes and brain from reality.

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