According to the National Association of Realtors, September marked the fourth consecutive month of rising home sales. With a further 9.7% increase over the previous month, home sales grew an astonishing 20% over last year. Fueled with interest rates at record lows, NAR’s chief economist Lawrence Yun sees the plentitude of buyers taking advantage of more purchasing power. On today’s telecommuting buyer hit list, vacation homes and larger homes with more flex and office space as well as room for families to weather this new paradigm shift of home-centricity.
The median sales price on the national level is up almost 15% from last year to $311,800. Across the country the housing shortage is causing higher prices and while new construction starts are at their highest since before the Great Recession, the housing demand will continue to fuel an atypical selling season. Looking at the fourth quarter, a time where fewer homes are offered for sale and further acerbated by cautious home sellers still reluctant to sell during a pandemic, the 4th quarter numbers will be much more of the same.
Here in Santa Fe we, too, are experiencing a Zoom Boom. Supported by statistics published by our Santa Fe Association of Realtors for the third quarter, our median sales price (combined city and county) rose over last year by almost 20% to a staggering $536,995. This unfortunately means that our housing affordability index has sunk to an all-time low at 55%. This translates to the concept that the median household income in Santa Fe is only 55% of the required income needed to qualify for the median priced home at current interest rates. This trend of affordability is one that is going to haunt us as we grapple with soaring home prices.
On the opposite side of the spectrum, NAR reports that sales of million-dollar homes has more than doubled this year over last. We are seeing this trend here in Santa Fe as the luxury real estate market is booming and inventory levels above a million shrink to less than nine months overall. However, if you dial that in by proximity to the Plaza or homes overlooking mountain views, the market becomes even tighter with inventory from which to choose. In previous years, a two-million-dollar home might be on the market for over two years. In today’s market, a home priced above $2,000,000 could sell quick, possibly within days of its arrival on the market.
As of October 1st, the total inventory of residential homes for sale in Santa Fe and the surrounding county was 437. Our days on market continues to fall with the available inventory and now sits at 53 days, a 12% decrease over last year at this time. With only two months of inventory in our local market, it is not surprising to see that multiple offers and bidding wars are all too common. A well-priced home in good condition can expect to sell within days and more and more buyers are having to drop everything to get into a new listing within the first 24 hours or miss out.
Chief economist Yun believes that the record low interest rates will remain low for the foreseeable future, maybe well into 2021. The nationwide shortage of homes for sale will continue to cause spikes in home prices however the ability to purchase will taper as homes become too expensive for average home buyers. Already, first time home buyers are losing ground in their purchasing power. For the last month, they represented only 31% of buyers while in normal years that number would be closer to 40%. The disparity in wealth between homeowners and renters is well documented. While homeowners can enjoy the growth in their equity, those who desire to become homeowners will be frustrated by lack of affordability. We need to find a balance in this nation to prevent more of the have and have not scenarios. We do not want our children and grandchildren to miss out on the American dream of home ownership and a stake in the future.