The Lora Company’s Taos Real Estate Market Report for the Year to May 31, 2020

Note:   The data in The Lora Company report do not include Angel Fire, Eagle Nest, Red River and other areas that are in the Taos County Association of Realtors MLS, but that we don’t consider part of the main Taos market.

May closed sales were down sharply, due to the Covid-19 health emergency and restrictions on travel.  May closings would typically have gone under contract in March and/or April, when the virus pandemic was at its height.

For the first five months of the year:

Total market (all categories of property) – The number of closed transactions is 168 this year vs. 188 last year, a decline of 20 sales (11%).  Total dollar sales are $52.2 million vs. $51.0 million, an increase of $1.2 million (2%).  The increase in dollar sales despite the decrease in unit sales is due to one sale: a ranch in El Rito that added $7 million to the total.

Single-family homes – Unit sales down 7 houses (6.5%).  Dollar sales down 5.0%.  SFH are 60% of total market transactions, 67% of dollar sales.

Condos – Unit sales down 7 condos (-26.9%).  Dollar sales down 30.5%.  Condos are 11% of total transactions, and 11% of dollar sales.

Land – Unit sales down 4 tracts (-8.3%).  Dollar sales up 172%.  Land is 26% of total transactions, and 20% of dollar sales.

Commercial – Unit sales down 3 (60.0%).  Dollar sales down 71.5%.  Commercial sales are 1% of total transactions, and 1% of dollar sales.

It is still unclear what impact the Covid-19 pandemic will have on Taos real estate sales over the rest of the year.  Prior to the pandemic, we were expecting 2020 to continue the same trends as in 2018-2019: strong interest in single-family homes and condos but with sales constrained by lack of inventory; gradually increasing interest in land; marginal improvement in commercial.  This summer, some buyers may be reluctant to travel to look at property, and others may postpone purchasing property if they have suffered major economic damage due to loss of income.  As this report is published, it appears that June sales will also fall substantially below sales in June 2019.  However, market activity lately has been brisk!  The pandemic may actually boost Taos real estate sales, as people seek a home in a less populous area for future emergencies.  There have been numerous articles in mainstream press about this.  The main summer and fall selling season may see enough sales to offset the year-to-date negative variance to last year.

Click here for detailed year-to-date data.

Click here for a chart with data for the past 15 years.

The second chart shows that, since bottoming out in 2011, the total market (all categories of property) through 2019 had recovered 130% in unit sales, but was still about 38% below peak year 2005 unit sales.  Dollar sales had recouped 170% from the bottom, but were still about 30% below peak year 2006 volume. Average prices for homes and condos were about back to peak levels, but land prices were still well below.

Following is a detailed discussion of each market segment:

SINGLE-FAMILY HOMES

May 2020 unit sales were down by 19 homes compared to May last year: 12 vs. 31 closed transactions (-61.3%).  Dollar sales for the month were down 64.8%.  As noted above, market activity dried up in March and April as the novel coronavirus took hold and people were staying at home.  The country is only gradually returning to semi-normal conditions, so sales in June and July will probably be less than last year’s levels. `

Year-to-date unit sales are now behind last year’s pace, after building up a positive variance through April: there have been 101 homes sold this year through May vs. 108 last year (-6.5%).  Dollar sales are down by 5.0% ($34.9 million vs. $36.7 million).  The pandemic is not the only factor affecting sales:  The inadequate supply of homes for sale that has plagued the market for the past several years is even more acute.

Median and Average Prices – For the first  five months of 2020, the median price is $318,200 vs. $324,500  for the same period last year, a decrease of $6,300 (-1.9%).   The average price year-to-date is up $5,500 (+1.6%) at $345,500 vs. $340,000 last year.  Here is a chart showing the trend in median and average prices over the past several years, and what they were in peak year 2007:

Price          2007        2016       2017         2018          2019        2020 YTD

Median   $325,000  283,500   300,000    311,000     322,500      318,200

Average $379,900   306,100   326,800    370,500    373,100       345,500

Price Level – Prices of single-family homes fell 30%–35% from the market peak in 2007 to a bottom in 2011.  Prices were basically flat for a few years, then they started to increase slowly, and mainly in the most preferred areas.  By 2015 prices were starting to rise in most cases as buyer interest began to gain momentum.  The rate of price rise has increased steadily over the past four years, as demand has continued to grow, while supply has steadily declined. Prices are now about equal to peak levels of 2007.  The trend should continue, as demand is expected to remain greater than supply.

Price Discounting – For the year to date, actual sales price has averaged  5.6% below the last asking price when the home went under contract; however, the discount from original asking price is 8.8%.  Some homes were overpriced when first listed, and had one or more price reductions before selling.  However, the trend of more demand than supply has caused the discount from original price to decrease from 2013 to 2019.  It’s too early to estimate how 2020 will play out, but with the inventory shortage, we expect the discount to diminish as buyers compete for scarce homes.

2013        2014     2015    2016    2017     2018     2019    2020 YTD

18.4%      16.9%   13.9%  13.3%  9.4%   10.3%     7.8%      8.8%

Days On Market – The average days on the market so far in 2020 is 178 vs. 164 for the same time frame in 2019, an increase of 14 days (8.5%).  This number will probably decrease, as good homes in preferred locations, especially those in the low- and mid-price range, are selling much faster than in years past, again due to the inventory shortage.  This chart illustrates DOM in peak year 2006, in the past seven years, and this year to date:

2006    2013    2014    2015    2016    2017    2018    2019    2020

247       244       235     235      226      192      147   151        178

Here is a chart indicating inventory and sales by price segment:

INVENTORY					UNIT	SALES
	Jun 2020	Jun 2019	Sep 2008	…….	2011		……	2019		…..	2020	YTD	……
					#	%		#	%		#	%			.
Up to $200,000	41	48	190		66	44%		58	22%		20	20%
$200,001 – $300,000	43	48	109		37	25%		63	23%		24	24%
$300,001 – $400,000	55	56	69		20	13%		74	27%		29	29%
$400,001 – $500,000	29	38	39		12	8%		27	10%		12	12 %
$500,001 – $650,000	34	32	35		9	6%		24	9%		11	11%
$650,001 – $800,000	21	24	27		4	3%		16	6%		2	2%
$800,001 – $1million	16	14	36		1	1%		4	1%		2	2%
Over $1,000,000	28	22	13		1	1%		4	1%		1	1%
TOTAL	267	282	518		150	100%		282	100%		101	100%

 

Inventory –   At the time of this report, there were 267 homes listed for sale, up 8.5% from 246 last month, but down 5.3% from 282 a year ago.  The highest inventory last year was 314 in August.  In September of 2008, there were 518 homes listed for sale.  The average inventory decreased steadily from 2013 to 2018; it stabilized in 2019, but it is still way below pre-2008 levels.

Here is  chart showing average inventory for the past seven years and the current number of homes listed for sale:

2013       2014       2015       2016       2017       2018       2019       2020

334          333         324         316         285        264          274         267

Taos inventory consists of a wide variety of size, price, style, location, and condition, so the current inventory is not a lot of properties to work with.  It is often difficult to find more than 3-4 homes to show a buyer that might meet most of his/her criteria.   The inventory shortage is definitely affecting total sales, as well as average prices, price per square foot, price discounting and days on market.

One reason for the reduced inventory is that property owners who in earlier times would have sold their Taos homes when they no longer used them are now holding them as rental property. The number of home rentals on sites such as Airbnb.com and vrbo.com has exploded over the past several years. The anecdotal evidence is that property owners are achieving good net income with vacation rentals—at least they were before Covid-19 started crushing the travel industry!  If owners financed purchases at low interest rates, with strong rental income they can achieve positive net cash flow after carrying costs.  Price appreciation adds another reason to hold the asset as part of an investment portfolio.

Another factor affecting supply is that, since the real estate crash of 2008, there has been very little “spec” building by contractors.  However, even if there were the same number of spec houses being built today that occurred in the 1990’s and early 2000’s, it would not amount to more than maybe an additional 20 homes in inventory at any given time.

It is unlikely that 2020 will see an increase in homes on the market..

How Home Purchases Were Financed:

	2011		2016			2019		2020 YTD
Cash	65	43%	91	36%		99	37%	35	35%
Conventional loan	66	44%	129	52%		143	53%	53	53%
FHA loan	8	5%	11	4%		11	4%	6	6%
VA loan	1	1%	10	4%		9	3%	5	5%
Seller financing	8	5%	7	3%		6	2%	0	0%
Other	2	1%	1	1%		3	1%	2	2%
Total	150	100%	249	100%		271	100%	101	100%

Interest Rates – Interest rates on residential loans remain very low by historical standards.  After fluctuating sharply in March-April due to market uncertainties caused by Covid-19, rates have stabilized.  Current rates are down slightly from a month ago; they are expected to remain very low in 2020, and probably into 2021 as well.

Here are current rates as posted by bankrate.com on June 20:

Conventional 30-year fixed:           3.40 %  (Nominal)    3.63 % (APR)

Conventional 15-year fixed:           2.86 %                      3.13 %

Jumbo  30-year fixed:                    3.48 %                      3.55 %

Jumbo 15-year fixed                      2.96 %                      3.01 %

Note: Interest rates are impacted by occupancy, credit score, and down payment.

Foreclosure Sales –  Through May of this year, there have been two foreclosure sales (2% of total sales).  The number of foreclosures has diminished steadily over the past several years, both in Taos and nationally.  There could be a spike in foreclosures nationally due to high unemployment and business closures caused by Covid-19; however, we do not think there will be a surge in Taos.

This table shows the number of foreclosure sales, and their percentage of total sales of single-family homes, for the previous nine years:

2011	44	(29%)
2012	55	(28%)
2013	37	(16%)
2014	50	(22%)
2015	34	(13%)
2016	34	(14%)
2017	29	(10%)
2018	24	(  9%)
2019	17	(  6%)
2020 YTD	2	(  2%)

Currently, there are 9 bank-owned houses listed for sale, down from 10 last month; one of these is under contract.

CONDOMINIUMS

Note:  These data do not include any of the condominiums developed at and adjacent to The Blake Hotel by the Taos Ski Valley resort owner; those condos are not listed in the Taos MLS.

May was another down month, with only 3 closed sales vs. 5 in May 2019 (-40.0%).  Dollar sales were down 58.6%.  Year-to-date unit sales are 19 vs. 26 last year (-26.9%).  Year-to-date dollar sales are down 30.5% at $5,787,600 this year vs. $8,323,500 last year.  Sales prices have ranged from $131,000 – $620,000.

Median price YTD is $240,000 this year vs. $323,300 last year, a decrease of $83,300 (-13.4%).  Median price for the full year 2019  was $230,000.  Peak median price (in 2007) was $263,000. 

Average (mean) price YTD is $304,600 this year vs. $320,100 last year, a decline of $15,500 (-4.8%).  Average price for the full year 2018 was $265,800; in 2007, average price was $279,100.

Although the median and average prices are down so far this year, 19 sales are not enough to predict a trend.  As with single-family homes, condo prices in general have been rising, due to the same inventory situation of more demand than supply. 

Price Discounting – So far this year, final sales price has averaged 3.1% less than last asking price when the condo went under contract; the discount from original price is 3.6%.  For the full year 2019, final sales price averaged 5.5% less than last asking price; the average discount from original asking price was 6.5%.

Inventory – The number of condos listed for sale at the time of this report was 51, up from 43 last month, but down from 62 in the same month a year ago.   The highest inventory in 2019 was 65 available for sale (in July and August).  2018’s peak inventory was 74 units.  Of the 51 units currently available for purchase, 33 (65%) are at Taos Ski Valley, while 18 are in or near the Town of Taos; those 18 include a variety of size, age, style and price.  As with single-family homes, the lack of inventory is a major constraint on sales.  In 2006, there were often over 200 condos on the market at any given time, with the majority in or near central Taos; there were 149 condo sales that year.

Scarce inventory is not the only reason for lower sales:  Conventional loans for condos are more difficult to obtain than they were before the financial crisis of 2008: the criteria for a Fannie Mae (FNMA) conforming loan are more stringently applied these days, and some condo projects do not qualify; therefore, even if the buyer is qualified, lenders who need the Fannie guarantee to be able to sell their loans in the secondary market won’t make a loan on these “non-warrantable” condos.

Foreclosure Sales –  There have been no foreclosure sales so far this year.  In 2019 there was only one foreclosure sale out of 79 condos sold.  Currently, there are no foreclosed condos listed for sale.

Here is a chart indicating inventory and sales by price segment:

			—–	—–	UNIT	SALES	——-	—–
	—–INVENTORY—–				2011			2019		2020
					full	year		full	year	YTD
	June	June	Sept.		# of			# of		# of
	2020	2019	2008		Sales	%		Sales	%	Sales	%
Up to $150,000	8	3	40		16	55%		11	14%	1	5%
$150,001 – $250,000	12	20	50		8	28%		37	47%	9	47%
$250,001 – $350,000	10	16	51		3	10 %		10	12%	2	11%
$350,001 – $500,000	19	19	56		1	3%		19	24%	5	26%
Over $500,000	2	4	29		1	3%		2	3%	2	11%
TOTAL	51	62	226		29	100%		79	100%	19	100%

Like single-family homes, many condo owners are holding their property as investments yielding attractive returns from rentals, thus reducing supply of condos available for purchase.

How Condo Purchases Were Financed:

	2011		2016			2019		2020 YTD
Cash	14	48%	34	51%		37	47%	14	74%
Conventional loan	15	52%	32	48%		38	48%	5	26%
Seller financing	0	0%	0	0%		0	0%	0	0%
Other	0	0%	1	1%		4	5%	0	0%
Total	29	100%	67	100%		79	100%	19	100%

 

MULTI-FAMILY

Multi-family has always been a very small portion of the Taos market. There have been just two multi-family sales during the first five months in 2020, up from one during the same time period last year.  These two sales totaled $442,000.  For the full year 2019 there were three sales, with total dollar volume of $810,000.  In 2018, there were four sales, with a total price of $1,847,000.  2017 had four sales, totaling $1,790,000.  Since 2004, the highest number of sales was 8 in 2005. 

There are currently 8 multi-family properties listed for sale.  There are two pending sales, a duplex and a 10-unit property, both in Ranchos de Taos.

The supply of long-term rentals in Taos is very low because many rental property owners have switched to short-term (vacation) rentals.  Long-term renters are having difficulty finding places to live.  Rents are rising, which should make the investment returns on multi-family properties attractive.  However, financing properties larger than a duplex is challenging due to the lack of comparable sales.

LAND

May 2020 units sales were 7, down from 13 in May last year (-46.2%).  Dollar sales were down 54.2%.

For the year to date, 44 pieces of land have sold, down 4 tracts (-8.3%) from the same time period of last year.  Dollar sales are up 172%, from $3.9 million to $10.6 million, due to one sale of $7 million (a 5,433-acre ranch in the El Rito area north of Taos).  Excluding that one sale, YTD dollar volume is $3,558,500 this year vs. $3,885,400 last year, a decrease of $326,900 (-8.4%).  Excluding the ranch sale, prices have ranged from $12,000 – $390,000 (a 0.9-acre lot at Taos Ski Valley).

Median price year-to-date is up $5,000 (7.7%) from $65,000 last year to $70,000 this year.  The one very high-priced sale doesn’t really affect median price.  Average (mean) price is up $159,100 (197%) with the ranch sale included; with the ranch sale excluded, average price is $82,800 this year to date compared to $80,900 last year, an increase of $1,900 (2.3%).

Price 2007 2016 2017 2018 2019 2020 YTD*

Median $ 89,000 52,300 64,500 62,700 65,000 70,000

Average $128,000 73,100 89,800 92,300 85,400 82,800

*excluding the $7 million sale

Land sales are slowly recovering from the recession, but they haven’t come back nearly as much as residential sales have.  From a low point of 41 transactions in 2011, 2019’s total of 152 sales was a gain of 270%, but that was still 56% below peak (2005) sales of 339 tracts.  Even if 2020 were to end the year with a gain of 20% in units sold over 2019, then total units sold in 2020 would be 182, which would still be 46% fewer than peak year sales of 339 tracts.

One reason for sluggish land sales is that the cost to buy land and build a home is still significantly greater than the price of an existing home, even though prices of existing homes are rising.  However, the inadequate inventory of homes available for purchase may start to drive more land sales: buyers who cannot find a suitable existing home may opt to buy land and build.

Here is a chart indicating inventory and sales by price segment:

		UNITS				SOLD
——INVENTORY—–				2017			2019		2020 YTD
	Current  Month	Same Month Last Year		#	%		#	%	#		%
Up to $50,000	129	152		46	39%		63	41%	17		39%
$50,000 – $100,000	161	156		34	29%		45	30%	16		36%
$100,001 -$150,000	59	82		16	14%		21	14%	4		9%
$150,001-$200,000	43	41		15	13%		9	6%	4		9%
$200,001– $250,000	27	33		3	2%		9	6%	1		2%
$250,001 – $300,000	16	19		2	2%		3	2%	0		0%
Over $300,000	52	52		2	2%		2	1%	2		5%
TOTAL	487	535		118	100%		152	100%	44		100%

At current sales pace, the inventory of 487 tracts for sale equals about a 3-year supply.

How Land Purchases Were Financed:

	2011		2016			2019		2020 YTD
Cash	28	69%	63	70%		111	73%	34	77%
Conventional loan	5	12%	6	7%		19	13%	5	11%
Seller financing	7	17%	20	22%		20	13%	3	7%
Other	1	2%	1	1%		2	1%	2	5%
Total	41	100%	90	100%		152	100%	44	100%

 

COMMERCIAL

For the year to May 31, there have been two commercial sales, down from 5 in the same period in 2019.   Both sales this year were commercial condos on the south side of Taos.  Total dollar sales are $535,000 vs. $1,877,500 last year (-71.5%).

For the full year 2019, there were 12 sales, a decrease of 2 (-14.3%) compared to 2018.  Total dollar sales for the year were $6,324,500 vs. $4,656,000 in 2018, an increase of $1,668,500 (+35.8%).

Currently, there are 34 commercial properties listed for sale. Of these, four are under contract: the Taos Tennis Ranch facility adjacent to the Quail Ridge Inn, with a listed price of $1.4 million; a 4,500-square foot building near Holy Cross Hospital listed at $450,000; a three-building retail property on Bent Street downtown, listed at $495,000; and a commercial condo on the south side of town.

The commercial market has been up and down over the past several years, with no clear trend.  Commercial sales are still well below peak year 2005, when 19 properties sold, with a total dollar volume of $8,735,600.  At the start of this year, our expectation was that the commercial market would continue to increase, but slowly.  However, the Covid-19 crisis is no doubt having a severe negative effect on local businesses, forcing stores and restaurants to close for many weeks; tourism will be down this year, which will further hurt business; some may not survive.  At this point in time, we forecast that 2020 year-end commercial sales will be down from 2019’s.