A booming and fluctuating oil and gas industry stimulated New Mexico’s housing market in recent years, causing shifts in home sales and valuation, particularly in areas known for extraction of oil and gas.
This year, the number of sales throughout the state took a dip, but the value of the homes grew.
All but one of New Mexico’s metropolitan statistical areas (MSAs) tracked by the Federal Housing Finance Agency (FHFA) saw growth in home appreciation in the last year.
Only Farmington in the Four Corners region of northwest New Mexico – an area where natural gas production recently began a downward trend – saw a decline, 2 percent, in appreciation.
Las Cruces was up 3 percent, Santa Fe was up 5 percent and Albuquerque grew by 2 percent.
Paul Wilson, 2019 president of the New Mexico Association of Realtors (NMAR) said Carlsbad and southeast New Mexico – where oil and gas is growing – is not tracked by the FHFA, but its appreciation likely grew into the double digits.
“The big trend right now is the oil and gas boom,” Wilson said. “You’ve got a lot of folks down there. You’ve got a lot of demand.”
Data from NMAR showed a slight decline in the number of statewide sales in January 2019, down to 1,491 from January 2018’s sales of 1,508.
That month, records show, posted the highest total sales in January in the last 10 years.
But despite slightly less homes sold, the median price in January grew from $190,000 in 2018 to $196,000.
President of the NMAR Paul Wilson said the state is largely seeing a shortage of available units driving up prices.
He said many first-time home buyers are simply priced out of the market.
“There is still a lack of adequate inventory in many areas, especially in the lower price ranges,” Wilson said. “That makes it harder for the first-time buyer to find a home at a price for which the mortgage is one for which they can qualify.
“Activity should pick up if interest rates do not rise and additional inventory is added to the market.”
Last year’s total sales were reported at 32,006, topping the previous year’s sales of 22,221 by almost 10,000 units.
Wilson said the biggest growth that year was also in regions on the receiving end of the oil and gas boom which began in late 2017, continuing through early 2019.
“Nearly every New Mexico county shows as increase in total sales this year as compared to 2017,” Wilson said. “The biggest increases occurred in counties with larger metropolitan areas and those prospering due to the oil and gas industry.”
The reason for the uptick in prices, Wilson said, is simple economics.
“Supply and demand is an incontrovertible law,” he said. “We see that all over the place. Houses prices right are selling very fast. House that aren’t, don’t sell.”
Buying or selling?
Most regions in the state are seller’s markets — when prices are driven up by low inventory and growing demand.
But in Farmington, it’s a buyer’s market.
Sam Todd, broker at RE/MAX of Farmington said changes in San Juan County’s economy – as the natural gas industry began its exodus from the area, bringing many workers and their families with it – drove up the amount of available homes and drove down the prices.
He said the average price per home in 2016 was 191,000, and then it dropped to 190,000 in 2017.
Last year saw a recovery, as the average price grew to $192,000.
Todd said many homeowners merely had to adjust their valuation and homes began to sell again.
“Our sales are going up, because our prices have trended downward to where they needed to be,” he said. “When oil and gas busted, we felt it here. All it was cause people to make adjustments in their values. Instead of keeping it so high, and just sitting there, they’re selling.
“We’re no longer a seller’s market. We’re a buyer’s market.”
Today, Farmington’s economy is driven by retail, Todd said, as the city and county boast numerous big-box retail chains such as Target and Walmart.
He said the city’s population could grow by up to 10,000 people each weekend, as shoppers come in from rural areas to frequent the large stores.
Also, as the Denver area in Colorado – just over New Mexico’s northern border to the west – continues to grow drastically, Todd said more people are opting to move south in New Mexico and Farmington to avoid the crowds and enjoy a more temperate climate.
“We’re seeing people moving from Colorado down here,” he said. “That area is growing so fast, they’re looking for ways to get out of that and still enjoy the Four Corners. I think Farmington is an affordable place to live. The climate is also drawing more people here.”
But across the state in the southeast, Carlsbad is seeing almost the opposite trend.
Prices are continuing to climb, and very few homes are on the market.
McKenna Brown, president of the Carlsbad chapter of the NMAR said it’s all about oil and gas.
“Oil has a big impact,” she said. “The increase of people coming in is oil-driven. A lot of oil companies are creating hubs here.”
XTO Energy and Occidental Petroleum recently announced plans to establish corporate offices in the Cavern City, and that means more permanent residents crossing the border from Texas – where most of the main oil and gas companies that operate in the Permian Basin are headquartered.
Those people need places to live.
Wilson estimated one house is needed for every 1.5 jobs.
So far, the solution to Carlsbad’s bursting population and its housing needs has been temporary, Brown said, with many newcomers being forced to habitat small apartments or hotel rooms.
Developers have tried to keep pace, but Brown said newer homes tend to cost more.
“All these people need places to live,” she said. “The solution is all the new apartments. It’s a seller’s market.”
A starter home usually priced around $150,000 is virtually unheard of in Carlsbad, Brown said, and many young professionals not tied to the oil and gas industry end up buying out of town and commuting, sometimes for hours, to get to work.
Carlsbad’s average home price was reported at about $209,000. That year saw an 11 percent growth from $188,000 at the beginning of 2018.
The number of homes sold grew by about 42 percent, up to 587 by the end of the year, compared with 413 the year prior.
“For young professionals who aren’t making enough to afford homes in that range, it does present an issue,” Brown said. “It’s a little bit of a bottleneck issue. Anytime you are presented with a gap, buyers in that range are going to struggle.
“I don’t know what the solution is.”
Will the growth continue?
For the foreseeable future, Brown said Carlsbad will have to grow as a community to sustain influxes in industry and population – which would maintain the local housing market’s growth.
“I’ve never seen Carlsbad this big,” Brown said. “It looks to me that with the infrastructure coming in, I don’t see it changing. Whenever you have a large influx, the community has to grow too.”
Russel Hardy saw that growth during his 20 years as a home owner in Carlsbad.
He recently put his family home up for sale, planning to retire from his job at the Carlsbad Environmental Monitoring and Research Center and move north to Roswell.
Hardy wouldn’t divulge how much he bought the home for originally, but the $445,000 price tag on it today, he said, gave him “sticker shock.”
The 3,118-square-foot home was valued at about $100 per square foot when he first bought it, Hardy said.
Today, he said it’s worth about $150 per square foot.
That means Hardy’s house grew in value by up to $150,000 in 20 years, which could allow Hardy to recoup about $100,000 in renovations he said he made during his two decades of ownership.
“I’m ashamed by how much I’m asking,” Hardy said. “Affordable homes are hard to come by. I’m used to what prices used to be, not what they are now. It’s because of all the workers coming in and putting stress on the market.
“They can’t build enough to keep up with demand.”
Adrian Hedden can be reached at 575-628-5516, firstname.lastname@example.org or @AdrianHedden on Twitter.
©2019 the Carlsbad Current-Argus (Carlsbad, N.M.)
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