2020 wasn’t just a surprisingly strong year for Albuquerque’s real estate market.
By some measures, it was the strongest since before the Great Recession.
According to the Greater Albuquerque Association of Realtors’ report on annual market statistics, the average sale price of a single-family home in the metro area in 2020 increased by 10.7% compared to 2019 – the largest single-year jump in the metro area since 2006.
Statewide, the New Mexico Association of Realtors recorded more home sales in 2020 than in any year since the organization began tracking the data in 2008, according to NMAR president Danny Vigil.
Real estate agents credited an influx of residents from other states, low interest rates and a shockingly low inventory of homes for the jump in prices. But industry professionals acknowledged that even they were surprised that the market stayed as robust as it did during a devastating pandemic.
“I don’t think any of us could have predicted this last year in any way, shape or form,” said GAAR president Belinda Franco.
While home price growth during an economic downturn might seem counterintuitive, Albuquerque wasn’t the only city that saw significant home price growth in 2020.
Nationwide, home prices increased by 9.2% year-over-year in December, according to a monthly report from the national data and analytics firm CoreLogic. The report notes that was the biggest annual increase since 2014.
Metropolitan areas in the Southwest saw particularly steep home price growth. San Diego saw prices increase 10.4% in December year-over-year, while Phoenix led the way with 13.7% growth, according to the report.
What’s driving the growth?
Albuquerque real estate agent Tego Venturi said many of the conditions for strong growth were in place before the COVID-19 pandemic reached New Mexico in March.
Venturi said Albuquerque already had a very limited inventory of homes on the market before the pandemic, and a massive number of millennials were approaching the age and income level where they might begin looking to buy a house for the first time.
“You just can’t fight against demographics,” he said.
Still, Venturi acknowledged that the pandemic exacerbated some of these trends. Mortgage rates dropped to record-low levels amid fear of an economic contraction, which Venturi and other real estate agents credit for keeping the market strong. In December, 30-year fixed-rate mortgages were available for less than 3%, according to Bankrate.com.
While Albuquerque has been a tight housing market for years, it got significantly tighter in 2020. By December, just 950 homes were on the market, compared to 1,901 a year earlier.
“I don’t like the word ‘crisis,'” Venturi said. “But it’s interesting out there.”
Venturi said the pandemic prompted more homeowners, particularly older New Mexicans who might have looked at moving into assisted living facilities, to hang onto their homes rather than putting them on the market.
Mackenzie Bishop, co-owner of Abrazo Homes and president of the Home Builders Association of Central New Mexico, said Albuquerque has chronically underbuilt housing for about a decade coming out of the recession.
By 2020, Bishop said the market was about 10,000 units behind where it should be, and the problem was exacerbated by increased lumber and transportation costs associated with the pandemic.
“If there’s a general theme … it’s just a shortage of supply,” Bishop said.
While hard numbers remain difficult to come by, real estate agents agree they also saw plenty of buyers from out of state in 2020. It was the fourth consecutive year that New Mexico saw a higher percentage of inbound moves than outbound moves, according to an annual survey by United Van Lines.
The industry professionals said new arrivals have been coming from all over the country, for a variety of reasons. Venturi cited data showing that new arrivals were coming from crowded East and West Coast markets, along with more expensive inland real estate markets like Denver.
“We are getting a fair amount of people coming in here because of our affordability,” Venturi said.
Franco said she worked with buyers from California, the Midwest and even Hawaii in 2020. Buyers cited a variety of different reasons for moving to New Mexico – from new jobs to better air quality – but Franco said one reason emerged as the most common.
“It really seems like they’re moving to be closer to family,” she said.
For all these reasons and more, home prices exploded in Albuquerque and across the state. The median home price in metro Albuquerque reached $247,500 for the year, the highest on record, according to GAAR. Statewide, all but three counties – Mora, Quay and Sierra – that recorded any home sales in both years saw a higher median sale price in 2020 than 2019, according to NMAR.
“I don’t think there’s really one area that’s the hot spot,” Vigil said.
While no one has a crystal ball to help predict how long the pandemic will continue, most real estate agents aren’t expecting a huge change to the underlying market conditions in 2021. Franco said she expects interest rates to remain low, homes to remain scarce, and Albuquerque to remain popular with new arrivals looking for sunshine and green chile.
“I think we’re going to see more of the same in 2021,” Franco said.
Franco added that she expects metro Albuquerque’s outlying areas – including Rio Rancho, Los Lunas and Mesa Del Sol – to stay popular.
“There’s more land to build (on), there’s newer construction,” she said.
Elsewhere in the state, Vigil said he was interested to see how recent federal restrictions on the oil and gas industry would impact real estate in Lea and Eddy counties, where a particularly tight housing market forced oil workers into RVs and temporary “man camps” while the oil and gas industry boomed.
Going forward, Venturi and Bishop said they were concerned about the supply of available homes in Albuquerque. With large companies like Amazon and Netflix increasing their footprint in the city, Venturi said a home shortage will continue forcing prices upward, making it more and more difficult for first-time homebuyers to afford starter homes in a city that’s long been marketed for its affordability.
“Unless we get a mass exodus of people out of Albuquerque, we just don’t have enough housing,” Venturi said.
Bishop said he expects the inventory of new homes to remain chronically low for another 12 to 18 months. After that point, he said he’s hopeful demand will slow down and allow builders to catch up.
“I do see 2021 as being a good year,” Bishop said. “I think 2022 could be a much healthier and stronger year.”