The Lora Company’s Taos Real Estate Market Report for December 31, 2018

Note:   The data in The Lora Company report do not include Angel Fire, Black Lake, Cimarron, Eagle Nest, Red River, Raton, Chama, Miami, Mora, San Miguel, Vallecitos, and “Other” areas that are in the Taos MLS but are not part of the main Taos market.  For the most part, buyers looking for property in Taos are not looking in those areas, and vice versa.  Those areas do not have their own MLS system, and many brokerages in those areas have joined the Taos MLS; since we feel that they are separate and distinct markets, they are not included in our report on the Taos market.

SUMMARY

Single-family home unit sales ended the year at 3 fewer than last year: 281 vs. 284 homes sold (-1.1%).  Dollar sales were UP by 12.2%. Unit sales are still 20% below peak level (reached in 2005); dollar sales are 11% below peak.  The lack of adequate inventory of good homes available for purchase has been a major constraint on sales.  Buyer interest continues to increase but supply has not kept up with demand.  Homes are selling faster than they have historically in Taos, and prices are rising.

IF YOU HAVE BEEN THINKING ABOUT SELLING YOUR HOME, CALL US AT THE LORA COMPANY FOR A FREE MARKET ANALYSIS AND CONSULTATION ABOUT YOUR HOME’S VALUE, THE SELLING PROCESS AND WHAT YOU NEED TO DO TO GET READY TO SELL!

Condo unit sales for the full year were UP by 5 over last year: 66 vs. 61 condos sold (+8.2%); however, this is below 2015’s and 2016’s sales of 68 and 67 units, respectively.  2018 Dollar sales were up 10.4% over 2017.  Compared to peak year sales (2006), unit sales are 56% fewer; dollar sales are 58% less.  Sales have been approximately the same for the past five years.  As with single-family homes, lack of inventory is one constraint; tighter mortgage lending standards is another.

Land unit sales were up by 3 over last year: 122 vs. 119 tracts sold (+2.5%).  Dollar sales were up 5.9%.  Although land sales have increased almost 200% from the bottom in 2011, the recovery has been slower than in homes and condos: 2018’s unit sales were 64% fewer than peak 2005; dollar sales were 76% below 2005.

Multi-family unit sales for 2018 were the same as last year: 4 properties sold.  Dollar sales were down 8.0%.  The multi-family market in Taos has always been very small:  the peak year was 2005, when 8 properties sold.

Commercial sales were 14 this year vs. 5 last year (+180%).  Dollar sales were up 63.3%.  The commercial market has been up and down over the past fifteen years.  In 2005, 19 properties sold; in 2011 only two sold; in 2015 there were 17 transactions; but 2016 had only 7.  It does seem as if the commercial market is starting to get some traction.

Click here for detailed data for the full year 2018.

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

As the second of these two charts shows, since bottoming out in 2011, the total market (all categories of property) through 2018 has gained 117% in unit sales, and 164% in dollar sales.  Following is a detailed discussion of the individual market segments.

SINGLE-FAMILY HOMES

SFH are by far the largest segment of the total Taos real estate market.  In 2018, SFH accounted for 58% of transactions, and 75% of dollar sales.

Full-year 2018 unit sales were 281 vs. 284 in 2017 (-1.1%).  However, dollar sales were up 12.2% ($104.1 million vs. $92.8 million).  Along with a general rise in the price level over the past several years, there has also been an increase in the number of high-end sales.  There were six sales over $1 million this year vs. only one last year.  Please see the chart below for a breakdown of sales by price segment.

Median and Average Prices – For the full year 2018, the median price was $311,000 vs. $300,000 last year (+3.7%) and $283,500 in 2016.  The average (mean) price was $370,500 vs. $326,800 last year (+13.4%), and $306,100 in 2016.  In peak year 2007, the median was $325,000 and the average was $379,900; therefore, 2018 median and average prices were just 4.3% and 2.5% below peak, respectively.

The highest sale price was the $5.4 million sale of the old Lineberry house and museum (noted in our September report).  It was followed by a $2.5 million sale of an 8-bedroom/8-bath home on 12 acres .  The Lora Company was involved with both sales as co-listing broker with Sotheby’s of Santa Fe.

Price Discounting – In 2018, actual selling price averaged 5.7% less than the last asking price when the property went into contract; however, the average discount from original asking price was 10.3%.  For the full year 2017, the discount from original price was 9.4%; in 2016, it was 10.5%; in 2015 it was 13.9%; in 2014 it was 16.9%; in 2013, it was 18.4%.

Price Level – Prices of single-family homes fell 30%–35% from the peak in 2007 to a bottom in 2011.  Prices were basically flat for a couple of years, then they started to increase slowly.  By 2015 prices were rising in most cases, due to increasing demand and limited supply; prices in the most preferred areas have risen more than others.  In 2018, we saw prices rising at a faster rate, as demand has picked up even more while supply has has steadily declined over the years.

Days On Market – The average days on the market for all the homes that sold in 2018 was 147 vs. 192 in 2017 (-23%).  Well-priced homes in the more desired areas are definitely selling faster than in years past: in 2016 days on market averaged 226; in 2015 was 235 days; in 2014, it was 235 days.  Even during the boom years 2004-2006, the average time to sell a house in Taos was about eight months.  However, today if buyers find a home that works for them, they are taking action rather than assuming that the home they like, or an acceptable substitute, will be available later.

Pending Sales – The number of homes under contract for sale at the time of this report was 17, down from 22 at last report a month ago.  Winter is generally a time of slower sales activity.

					UNIT	SALES
INVENTORY					2011	low pt		2017			2018
					full	year		full	year		full	year
	Current	Last .	Sept.
	Month	Month	2008		#	%		#	%		#	%
Up to $200,000	47	51	190		66	44%		77	27%		70	25%
$200,001 – $300,000	38	41	109		37	25%		66	23%		66	23%
$300,001 – $400,000	44	51	69		20	13%		65	23%		61	22%
$400,001 – $500,000	30	31	39		12	8%		33	12%		34	12 %
$500,001 – $650,000	26	25	35		9	6%		25	9%		31	11%
$650,001 – $800,000	20	25	27		4	3%		15	5%		9	3%
$800,001 –    $1  million	8	8	36		1	1%		2	1%		4	2%
Over $1,000,000	23	27	13		1	1%		1	0%		6	2%
TOTAL	236	259	518		150	100%		284	100%		281	100%

 

Inventory –   The inventory of available homes listed for sale decreased again, from 259 last month to 236 at the time of this report.  The highest inventory in 2018 was 328 (September).  In 2017, the number of homes available for purchase during the year ranged from a low of 228 to a high of 329, averaging 285.    Current inventory is substantially less than during the early 2000’s; for example, in 2008 there was a high of 518 homes for sale.   The average inventory has decreased steadily over the past five years: 2014 averaged 333 homes available; 2015 had 324; 2016 had 316; 2017 had 288; 2018 had 264.

The inventory consists of a wide variety of price, style, location, and condition, so today’s inventory is not a lot to work with.  It is often difficult to find more than 5-6 homes to show a buyer that might meet most of his or her criteria.   The inventory shortage is affecting total sales, average prices, sales prices per square foot, price discounting and days on market.

One reason for the reduced inventory is that there is very little “spec” building happening, in which a contractor builds a home to list for sale (rather than “custom” building, where the contractor builds for an owner of a lot). Another (probably stronger) reason may be that property owners who financed purchases at extremely low interest rates are holding the property in the expectation that price appreciation is greater than financing and other holding costs. Additionally, many homeowners are making good income from vacation rentals. The number of home rentals on sites such as Airbnb.com and vrbo.com has exploded over the past several years. With positive net cash flow plus price appreciation,many owners are holding the asset.

How Home Sales Were Financed:

	2011		2016			2017		2018
Cash	65	43%	91	36%		95	33%	105	37%
Conventional loan	66	44%	129	52%		170	60%	146	52%
FHA loan	8	5%	11	4%		7	2%	11	4%
VA loan	1	1%	10	4%		8	3%	8	3%
Seller financing	8	5%	7	3%		2	1%	6	2%
Other	2	1%	1	1%		2	1%	5	2%
Total	150	100%	249	100%		284	100%	281	100%

 

Interest Rates – Interest rates on residential loans were trending up during 2018, but recently they have come down some.  Here are rates as of January 14, provided by  local mortgage broker Dimond Mortgage, Donna Nelson, NMLS ID 190187, email donna@dimondmortgage.com, telephone 575-758-5566:

Conventional 30 year fixed:                4.375% (nominal rate)   4.570%  (APR)

Conventional 15 year fixed:                3.990%                          4.330%

FHA 30 year fixed:                              3.875%                          4.094%

High Balance (up to $726,525)           4.500%                          4.684%

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

Foreclosure Sales –  In 2018, there were 24 foreclosure sales (8.5% of total units sold).  These ranged in price from $46,000 to $295,000.  The number of foreclosure sales, and their percentage of total sales of single-family homes, for the previous eight years were:

2018	24	(8.5%)
2017	29	(10%)
2016	34	(14%)
2015	34	(13%)
2014	50	(22%)
2013	37	(16%)
2012	55	(28%)
2011	44	(29%)

 

Currently, there are only 8 bank-owned houses listed for sale; of those, three are under contract (sale pending). The number of foreclosures has diminished steadily over the past several years, both locally here in Taos and nationally.

CONDOMINIUMS

For the full year 2018, there were 66 condos sold, a gain of 5 units (8.2%) over 2017’s total.  Dollar sales were up 10.4%, from $14,874,400 to  $16,426,500.  Sales prices ranged from $48,000 to $1,030,000.  In peak year 2006, there were 149 condos sold with a total price of $38,643,000.

Median price in 2018 was $212,500 vs. $215,000 in 2017, a decrease of 1.2%.  The median price in 2016 was $188,000.

Average (mean) price in 2018 was $248,900 vs. $243,800 in 2017 (+2.1%).  In 2016 it was $212,900.

Price Discounting – For the year, final sales price averaged 4.9% less than last asking price when the condo went under contract; the discount from original price was 6.5%.  For the full year 2017, final sales price averaged 4.6% less than last asking price; the average discount from original asking price was 6.6%.  For the full year 2016, the discount from original price averaged 11.8%.

Inventory – The number of condos listed for sale decreased again, from 51 last month to 45 at the time of this report.  However, 24 of those are at Taos Ski Valley (53% of available units); there are only 21 condos available for purchase for buyers who don’t want the Ski Valley location. For a buyer looking up to $300,000, there are only 15 condos for sale, and of those only 9 are not at TSV.  Peak inventory this year was 74 units available for sale (September).  As with single-family homes, the lack of inventory is constraining sales.  In 2006, there were often over 200 condos on the market at any given time.

However, inventory is not the only reason for lackluster sales:  Conventional loans for condos are more difficult to obtain than they were before the real estate bubble burst in 2008: the criteria for a Fannie Mae (FNMA) conforming loan are more stringently applied these days, so 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 on the secondary market won’t make a loan on those “non-warrantable” condos.

Foreclosure Sales –  In 2018 there was only one foreclosure sale (1.5% of total units sold).  In 2017 there were 5 foreclosure sales (8%).

MULTI-FAMILY

For the full year 2018 there were four sales (a 7-unit property, one duplex, and two triplexes) with total sales prices of $1,657,000.  In 2017, there were four sales, with a total price of $1,790,000.  2016 had just two sales, totaling $787,500.

There are currently 12 multi-family properties listed for sale.  There are no pending sales.

It is somewhat surprising that Investor interest in multi-family property has been so little. 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; therefore capitalization rates (net operating income as a percentage of sales price, i.e., rate of return on investment) should be more attractive to investors.  On the other hand, if interest rates rise, then investors will demand higher cap rates, which will reduce values.  However, the rate of increase in rents should more than make up for the rate of increase in interest rates, so investor interest should increase for reasonably priced properties.  However, the asking prices for many of the listed properties do not yield an adequate rate of return for most investors; this is probably the main reason for the lack of sales.

LAND

For the full year 2018, a total of 122 tracts sold, a gain of 3 over 2017 (+2.5%).  Dollar volume was up 5.9%, from $10,635,800 to $11,259,700. The highest price was a 114-acre property in San Cristobal that sold for $1,075,000.  This was followed by a 0.33-acre home site at Taos Ski Valley that sold for $537,500. There were three sales in the $300,000’s, seven in the $200,000’s; and 17 between $100K and $200K.

Due to the limited inventory of single-family homes available for purchase, land sales are starting to increase as some people who want a home in Taos but who cannot find an existing home that suits them are opting to buy land and build.  Additionally, a few “spec” builders are buying land.  2018’s total of 122 sales equals a gain of almost 200% from the market low of 41 sales in 2011; but land sales are still 64% below peak (2005) level.

Price Discounting – For the year 2018, final sales price averaged 12.5% less than the last asking price when the land sold; the discount from original price was 18.3%.  For full-year 2017, final sales price averaged 12.1% less than last asking price; the discount from original asking price was 20.0%.   For the full year 2016, the discount from last asking price was 13.4%;  the discount from original asking price was 22.4%.

The average days on market for 2018 was 391 vs. 469 for the same period last year (-16.6%).  In 2016 it was 464; in 2015 it was 605 days; in 2014 it was 390; in 2013 it was 465.

		UNITS				SOLD
——INVENTORY—–				2016			2017		2018  Y-T-D
	Current Month	Last Month		#	%		#	%	#	%
Up to $50,000	144	158		42	47%		46	39%	51	42%
$50,000 – $100,000	168	171		31	34%		34	29%	42	35%
$100,001 -$150,000	71	71		8	9%		16	14%	12	10%
$150,001-$200,000	35	36		5	6%		15	13%	5	4%
$200,001– $250,000	29	29		0	0%		3	2%	4	3%
$250,001 – $300,000	15	15		2	2%		2	2%	3	2%
Over $300,000	44	50		2	2%		2	2%	5	4%
TOTAL	506	530		90	100%		118	100%	122	100%

 

The number of pending sales decreased from 10 last month to 6 at the time of this report.  Land sales are particularly slow during winter.

The inventory decreased again, from 530 to 506 tracts listed for sale.  This equates to a 4.1year supply at this year’s absorption rate; however, as with single-family homes, the inventory tends to be lower in winter; the highest inventory in 2018 was 592 (August), and that would equate to a 4.9-year supply at 2018’s absorption rate.

Although land sales are picking up, the number of land sales is still very low compared to the early 2000’s.  In the full year 2005, there were 339 closed land sales for a total value of $46 million.  In 2006, 296 tracts sold for a total of $42.7 million.

COMMERCIAL

The commercial market has been up and down.  2018 had 14 sales, an increase of 9 (180%) over 2017. 2018 dollar sales were $4,656,000 compared to $2,851,000 last year (+63.3%).  2016 had 7 sales totaling $2,890.800.  In 2015, there were 17 sales, totaling $8.1 million.  In 2014, there were just three sales, totaling $2.3 million.  The peak year for commercial sales was 2005, when 19 properties sold, with a total dollar volume of $8,735,600.

Currently, there are 29 commercial properties listed for sale.  Of these, two are under contract: a 9-unit mobile home park priced at $230,000, and the RV park south of Town with an asking price of $350,000, which has been pending for years; a “dollar store” company is the buyer, but there is a lengthy due diligence/approval process.

The commercial market does seem to be getting some traction.  Perhaps the cumulative impact of the investment at Taos Ski Valley, the inception of limited air service to Taos from Dallas and Austin, and the generally strong national economy, have begun to stimulate interest in commercial property!