One of the lingering and unwanted effects of the Fed’s quantitative easing program and artificially low mortgage rates, as I wrote here, is the current existing-home supply shortage. This effect kicked in only after the Fed began to raise rates and mortgages topped 5.00%, and will likely persist as long as rates are at current levels. Santa Fe is not exempt, of course. Sales volumes are well off their highs, though November saw a bit of an uptick.
The Santa Fe Association of Realtors (SFAR) publishes monthly volumes for a region that includes Santa Fe proper and the outlying areas (such as the northwest) that we consider part of town. In November 2023, we saw a 3.22% increase in transactions versus November of 2022. With the exception of June 2023, which saw a 15% increase versus the year-ago period, volumes are off.
Is November the beginning of a rebound? It’s too early to tell. It is likely reflective of the respite from 8% mortgage rates that’s come as treasuries staged a strong rally, after a selloff in the months before. The next few months will tell.
Land Sales Continue to Climb, as Expected
Bare land sales continue to skyrocket. Why? Builders across the country are racing to fill the supply shortage of existing homes, as homeowners are reluctant to leave cheap mortgages behind. I wrote about that here. November 2023 in Santa Fe saw a 122.22% increase in new land sales, following on the heels of a 20.58% rise in October. Land sales started to turn around in May of this year and with the exception of August, the trend has been higher. Will it continue? There’s no way to know, but the demand appears to be in play to make it possible. If I were a betting man, I’d say yes.
Building a Custom Home as a Long-Term Strategy
With supply severely constrained in the existing home market, there’s lots of reasons why lot sales might continue to climb and indeed, building a custom home on a newly purchased lot, for those with a long time horizon, may be a smart strategy. You get exactly what you want, you don’t have to wait six months for the right home to come along, and your home’s gleaming and newly minted.
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