The Lora Company’s Taos Real Estate Market Report for the Year to August 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 which we don’t consider part of the main Taos market.

After a drop earlier in the year due to the onset of the Covid-19 pandemic, single-family home sales have surged in the past three months.  The market is hot!  The number of properties going under contract has jumped to levels not seen before.  Covid-19 has added a new wave of buyers to a market that has been steadily gaining momentum for the past several years, as people seek a home in a less populous area, with wide open spaces and clean air. Unfortunately, the inventory of homes listed for sale is not keeping up with burgeoning demand, so sales are fewer than they would be if there were more homes on the market.  Condo demand is also picking up, and the same lack of inventory applies to this segment of the market.  Land sales are still lagging last year’s pace; however, if the supply of homes available for purchase continues to dwindle, then more buyers may decide to buy land and build.

For the first eight months of the year:

Total market (all categories of property) – The number of closed transactions is up 6.6% (338 sales this year vs. 317 last year, an increase of 21.  Total dollar sales are up 19.5% ($98.4 million vs. $82.4 million, a gain of $16.0 million.  However, this year’s total includes one unusually high dollar sale: a ranch that was reported at $7 million; excluding that one sale, 2020 sales are $9 million more than 2019 (+10.9%).

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 just shy of peak levels, but land prices were still well below that.

Following is a detailed discussion of each market segment:

SINGLE-FAMILY HOMES

August 2020 unit sales were again up sharply over the same month last year:  38 vs. 21 closed transactions (+81.0%).  Dollar sales for the month were up 93.2%.  June, July and August strong sales followed a big dip in May which was caused by the Covid-19 stay-at-home orders that went into effect in March-April.  As soon as people were allowed to start traveling again, buying activity spiked.

Year-to-date unit sales are now 21.2% above last year’s pace: 200 homes sold this year vs. 165 last year.  Dollar sales are up 19.8% ($69.3 million vs. $57.9 million).  Currently, there are 47 sales pending, down slightly from 50 a month ago, but still much more than the 20-30 that has been the average level over the past ten years.

Median and Average Prices – Through eight months of 2020, the median price (midpoint) is $319,100 vs. $331,000 for the same period last year, a decrease of $11,900 (-3.6%).   The average (mean) price year-to-date is $346,700, down $4,200 (-1.2%) from 2019.  Although these two averages are down slightly at this point in time, it is clear that prices of many homes are rising sharply due to the big imbalance between supply and demand.

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      319,100

Average $379,900   306,100   326,800    370,500    373,100       346,700

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.  Recently, the rate of price rise is accelerating as buyer competition for scarce inventory heats up.

Price Discounting – For the year through August, 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 8.3%.  The trend of demand exceeding supply has caused the discount from original price to decrease from 2013 to 2019.  This discount should continue to diminish (if homes are not listed at unreasonably high asking prices).  Here is a chart showing the discount from original asking price over the past eight years:

2013        2014     2015    2016    2017     2018     2019    2020 YTD

18.4%      16.9%   13.9%  13.3%  9.4%   10.3%     7.8%      8.3%

Days On Market – The average days on the market so far in 2020 is 153 vs. 146 for the same time frame in 2019, an increase of 7 days (4.8%).  Please note that this is just an average for the entire market.  Good homes in preferred locations, especially those in the low- and mid-price range, are selling much faster than in years past, due to the inventory shortage and increased buyer competition.  We are seeing many homes go under contract soon after being listed for sale.  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    153

Here is another chart, with data on current inventory and unit sales by price segment for the year to date:

INVENTORY					UNIT	SALES
	Sep 2020	Sep 2019	Sep 2008	…….	2011		……	2019		…..	2020	YTD	……
					#	%		#	%		#	%			.
Up to $200,000	39	43	190		66	44%		58	22%		39	20%
$200,001 – $300,000	35	62	109		37	25%		63	23%		49	24%
$300,001 – $400,000	55	65	69		20	13%		74	27%		55	27%
$400,001 – $500,000	26	42	39		12	8%		27	10%		25	12 %
$500,001 – $650,000	38	26	35		9	6%		24	9%		20	10%
$650,001 – $800,000	22	34	27		4	3%		16	6%		5	3%
$800,001 – $1million	16	13	36		1	1%		4	1%		6	3%
Over $1,000,000	34	25	13		1	1%		4	1%		1	1%
TOTAL	265	310	518		150	100%		282	100%		200	100%

Inventory –   At the time this report was prepared, there were 265 homes listed for sale, down 2 units (0.7%) from 267 last month, and down 45 homes from 310 a year ago (-14.5%).  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 2019-2020, 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         265

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 strong income from vacation rentals. If owners financed purchases at low interest rates, they are probably achieving attractive returns on investment. 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.

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.   With sales increasing–even among homes with less popular styles and locations–and with no significant increase in the building of new homes or the listing of existing homes, the inventory will probably continue to shrink relative to demand.  The acute inventory shortage is definitely affecting total sales, as well as average prices, price per square foot, price discounting and days on market.

How Home Purchases Were Financed:

	2011		2016			2019		2020 YTD
Cash	65	43%	91	36%		99	37%	67	34%
Conventional loan	66	44%	129	52%		143	53%	112	56%
FHA loan	8	5%	11	4%		11	4%	7	3%
VA loan	1	1%	10	4%		9	3%	8	4%
Seller financing	8	5%	7	3%		6	2%	1	1%
Other	2	1%	1	1%		3	1%	5	2%
Total	150	100%	249	100%		271	100%	200	100%

Interest Rates – Interest rates on residential loans remain amazingly low by historical standards.  After fluctuating sharply in March-April due to market uncertainties caused by Covid-19, rates stabilized, and then decreased some.  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 September 18:

Conventional 30-year fixed:           2.98 %  (Nominal)    3.19 %  (APR)

Conventional 15-year fixed:           2.45 %                      2.67 %

Jumbo  30-year fixed:                    3.00 %                      3.07 %

5/1 Adjustable                                3.04 %                      3.64 %

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

Foreclosure Sales –  Through August of this year, there have been seven foreclosure sales (3.5% of total sales).  The number of foreclosures has diminished steadily over the past several years, both in Taos and nationally.  Nationally, there could be a spike in foreclosures due to high unemployment and business closures caused by Covid-19; however, we do not think there will be a significant increase 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	7	(  4%)

Currently, there are 6 bank-owned houses listed for sale, the same as last month; three of these are under contract.

CONDOMINIUMS

Note:  These data do not include any of the condominiums developed by the Taos Ski Valley resort owner; those condos are not listed in the Taos MLS.

August was the second month in a row since January in which the month’s sales exceeded sales in the same month last year.  There were 13 closed sales in August 2020 vs. 7 in July 2019 (+86%).  Dollar sales were up 166%.  Year-to-date unit sales are now just one shy of last year:  43 vs. 44. Like single-family homes, condos are experiencing something of a surge, due to the Covid-19 buying wave.  At the time of this report, there are 16 condo sales pending, up dramatically from the usual 2-5.

Year-to-date dollar sales are up 4.0% at $13.3 million this year vs. $12.8 million last year.  Sales prices have ranged from $91,000 – $620,000.

Median price YTD is $301,000 this year vs. $245,100 last year, an increase of $55,900 (22.8%).  Median price for the full year 2019  was $230,000.  Peak median price (in 2007) was $263,000. 

Average (mean) price YTD is $309,600 this year vs. $290,800 last year, a gain of $18,800 (6.5%).  Average price for the full year 2018 was $265,800; in 2007, average price was $279,100.

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 2.2% less than last asking price when the condo went under contract; the discount from original price is 3.0%.  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 54, down 4 units from 58 last month, and down 7 from 61 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 54 units currently available for purchase, 33 (61%) are at Taos Ski Valley, while only 21 are in or near the Town of Taos; those 21 include a wide variety of size, age, style and price.  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.

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

			—–	—–	UNIT	SALES	——-	—–
	—–INVENTORY—–				2011			2019		2020
					full	year		full	year	YTD
	Sep	Sep	Sept.		# of			# of		# of
	2020	2019	2008		Sales	%		Sales	%	Sales	%
Up to $150,000	8	3	40		16	55%		11	14%	3	7%
$150,001 – $250,000	11	22	50		8	28%		37	47%	16	37%
$250,001 – $350,000	13	16	51		3	10 %		10	12%	8	19%
$350,001 – $500,000	19	18	56		1	3%		19	24%	13	30%
Over $500,000	3	2	29		1	3%		2	3%	3	7%
TOTAL	54	61	226		29	100%		79	100%	43	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%	27	63%
Conventional loan	15	52%	32	48%		38	48%	15	35%
Seller financing	0	0%	0	0%		0	0%	1	2%
Other	0	0%	1	1%		4	5%	0	0%
Total	29	100%	67	100%		79	100%	43	100%

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.

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 eight months of 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 9 multi-family properties listed for sale.  There is one pending sale, a 10-unit property in Ranchos de Taos adjacent to the Ranchos Plaza.

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, conventional financing of properties larger than a duplex is challenging due to the lack of comparable sales.  The Town of Taos has imposed a limit on permits for short-term rentals, which should cause some property owners to revert to long-term rentals; however, this will not alleviate the shortage of available rentals for locals.

LAND

August 2020 had 13 closed sales, down from 19 in August 2019.  Dollar sales were down $354,600 (-28.4%) from$1,250,000 last year to $896,100 this year.

For the year to date, 88 pieces of land have sold, down 12 tracts (-12.0%) from the same time period last year.  Dollar sales are up 78%, from $7,913,300 to $14,117,200.  However, the large increase is due to one sale in April which was reported at $7 million (a 5,433-acre ranch in the El Rito area north of Taos)–an unusually high price for the Taos market.  Excluding that one sale, YTD dollar volume is down $796,100 (-10.1%).  Excluding the ranch sale, prices have ranged from $11,000 – $390,000 (a 0.9-acre lot at Taos Ski Valley).

Median price year-to-date of $65,800 is up $700 (1.1%) from $65,100 last year.  The $7 million sale doesn’t affect median price (the midpoint of prices), but it does affect average (mean) price.  Average price of $160,400 is up $81,300 (103%) over last year’s average of $79,100 with the ranch sale included; with the ranch sale excluded, average price is $81,800 this year, an increase of $2,700 (3.4%).

Price          2007    2016       2017      2018    2019      2020 YTD*

Median     89,000  52,300   64,500   62,700   65,000     65,800

Average  128,000  73,100  89,800   92,300   85,400      81,800

*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.  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.  Currently, there are 46 pending sales, up sharply from what has been typical in any given month.

Price Discounting – Year-to-date, the discount from last asking price when the property went under contract is 8.2%; the discount from original asking price is 11.4%.  The discounts have diminished over the past six years.  For the full year 2019, the discount from last asking price was 9.5%; the discount from original asking price was 15.9%. Discounts for land are greater than for residential sales because land is still pretty much a buyer’s market, whereas is residential is a seller’s market.

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	137	148		46	39%		63	41%	34		39%
$50,000 – $100,000	154	179		34	29%		45	30%	33		38%
$100,001 -$150,000	68	80		16	14%		21	14%	8		9%
$150,001-$200,000	44	43		15	13%		9	6%	8		9%
$200,001– $250,000	23	39		3	2%		9	6%	3		3%
$250,001 – $300,000	19	15		2	2%		3	2%	0		0%
Over $300,000	58	51		2	2%		2	1%	2		2%
TOTAL	503	555		118	100%		152	100%	88		100%

At current sales pace, the inventory of 503 tracts for sale equals about a 3.5-year supply.

How Land Purchases Were Financed:

	2011		2016			2019		2020 YTD
Cash	28	69%	63	70%		111	73%	72	82%
Conventional loan	5	12%	6	7%		19	13%	9	10%
Seller financing	7	17%	20	22%		20	13%	6	7%
Other	1	2%	1	1%		2	1%	1	1%
Total	41	100%	90	100%		152	100%	88	100%

 

COMMERCIAL

For the year to August 31, there have been five commercial sales, down from seven in the same period in 2019.   Two were commercial condos; one was a 4,000-square foot space in a light manufacturing zone; one was a 3-unit retail complex on Bent Street in the central business district, and one was a 1,600-square foot space that had been an upholstery shop.  Total dollar sales are $1,218,000 vs. $3,579,500 last year, a decrease of $2,361,500 (-66.0%).

For the full year 2019, there were 12 sales, a decrease of 2 transactions (-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 33 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 former cabinet-making shop with two residential rentals on Hwy 64 going out toward the airport priced at $468,000; the 29-space RV Park and 26-room motel property south of Town with a list price of  $825,000; and a 4,000-square foot metal building in the light manufacturing zone, priced at $465,000.

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 slowly improve; however, the Covid-19 crisis dealt a severe blow to many local businesses during spring and summer. Although tourism has picked up, there are still restrictions on restaurants, hotels and other businesses.  Furthermore, at this point nobody knows what the program at Taos Ski Valley this winter is going to be.  Winter business may be affected.  When the health crisis subsides, the commercial market may revive, especially if residential and land sale continue to increase.

 

 

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