You might hear that the home buying market in Albuquerque is cooling. And that’s not necessarily wrong.
Inventory in the Albuquerque metro area increased and days on market until sale grew in October from the same time last year — something that happens in a cooling market — according to a report from the Greater Albuquerque Association of Realtors.
That is largely due to rising home prices and mortgage rates, making some potential buyers pause in their tracks. Some of the cooling trend has to do with this time of the year being a down time in the market, with more people putting up Christmas trees rather than dotting the i’s and crossing the t’s on paperwork for the purchasing of a new home.
But the market may have cooled off just a couple degrees, because the Albuquerque metro area still remains relatively hot even despite the median sales price standing at $335,000 last month and the 30-year fixed mortgage rate hovering slightly above 7%.
“The American Dream is still selling — and selling large,” Chad Krieger, vice president of mortgage lending for U.S. Eagle, told the Journal. “And when people want to buy a house, by golly, they’ll pay for it. … They’ll do whatever they can to get into it.”
What does the local market look like now?
October’s number of $335,000 for a single-family detached home was the 12th straight month the median sales price has hovered above $300,000, according to GAAR data.
Last month’s median sales price is a dip from $340,000 in September — the highest number ever for the area — but is a year-over-year increase of more than $42,000.
Bridget Gilbert, president of GAAR, said it is likely that prices for single-family detached homes will remain in that ballpark for the foreseeable future as inventory remains relatively low at 1,407.
Inventory remained unchanged from September, but has increased year over year by about 335 units, according to GAAR data.
“We still have a little bit of an inventory issue,” Gilbert said. “Things have cooled some. … But, I mean, we have made improvements.”
Another indicator that the market has cooled some is an extension of days on market until sale, which stood at 23 days in October. That’s compared to 19 average days on the market in September and 15 average days last October, according to GAAR data.
Anything lower than 30 days tends to still represent a market that bodes well for sellers, Gilbert said, and indicates the market is still alive and well. Gilbert said, though, that she expects the market to cool some more in the first quarter of next year if interest rates remain high — and that homes on the market until they are sold may pass the 30-day mark in the first quarter of next year.
How interest rates factor in
Interest rates are a key indicator in how the market will move going forward.
According to Freddie Mac, a government-backed lending company, the 30-year fixed rate mortgage stood slightly above 7% in mid-November — basically unchanged from late October.
But those rates have increased rapidly over the past two years — and especially in the last few months when the 30-year fixed rate mortgage was as low as 3.2% in January, according to Freddie Mac.
That rapid increase of about 4% in mortgage rates has likely paused some prospective homebuyers in their tracks, said Michelle Coons, New Mexico regional president for WaFd Bank.
She said while her bank hasn’t seen a huge decrease in mortgage loan applications — a decline of just 8% year over year over a 90-day period — more people may be willing to look at purchasing a single-family attached home, which is significantly cheaper than those that are detached.
“It is forcing individuals in a higher rate environment into smaller homes, which is why I think you’re continuing to see that 13 average days on market in … attached homes,” Coons said.
Despite the shift towards a slightly cooler market, the metro area remains a relatively cheap place to live and that has kept the market hot for this long, local experts say.
“New Mexico is… one of the most affordable states within the West,” Krieger said. “The purchase market is still quite viable just as long as that inventory opens up.”