Out of 42 multiple listing service or MLS areas in the metro, 32 posted year-over-year increases or no change in median price, a 50 percent increase from 21 in the first quarter of 2013, according to the Greater Albuquerque Association of Realtors. Only seven MLS areas posted increases in the first quarter of 2012.
While the recovery has broadened, the gains partially were offset by home price drops in struggling MLS areas, leaving the metro with a modest 1.6 percent year-over-year increase in median price to $172,700 for a detached single-family house. Median price means half sold for more and half sold for less.
The average price increased year over year by 3 percent to $206,526 in the first quarter, within range of the pre-bubble average of 4 percent each year from 1983 to 2003. The 1,809 detached, single-family home sales were the most in any first quarter since 2,415 homes were sold in early 2007.
“The number of units sold is increasing,” said GAAR Executive Vice President Janice McCrary. “We’re seeing modest price increases. We’re headed in the right direction.”
Housing’s major role
Real estate activity plays a major role in the economy, accounting for 16.7 percent of New Mexico’s gross state product in 2012, according to a new analysis of federal data by the National Association of Realtors. Before the housing downturn, its would have accounted for 18 percent or higher.
Based on a median sale price of $172,100, each home sale in New Mexico generates $50,992 in total income using a multiplier calculation.
The income is generated in a number of ways, such as a new homebuyer’s spending on household goods and improvements. In addition, the “wealth effect” of homeownership in an appreciating housing market serves to boost consumer spending in general.
The biggest income generator is the calculation that, for every eight existing homes that are sold, a new house gets built – a ratio that holds roughly true in the Albuquerque metro. Thus the housing recovery should have a strong impact on employment, the analysis says.
The recovery, now entering its third year, reflects a 12-year cycle in the metro’s residential real estate market, said Peter Parnegg, co-owner of Coldwell Banker Legacy.
Based on average annual sale prices, the 12 years of the cycle are measured from the lowest points or troughs in prices as they fluctuate over the years, he explained. In recent decades, home price troughs were reached in 1988, 2000 and 2011.
It should be noted the 12-year cycle does not show itself as clearly if median price is used.
The upshot is that, if the pattern of past recoveries holds true, the average annual home price will post its biggest percentage increase in 2016, Parnegg said.
March, the last month of the first quarter, saw the biggest monthly influx of new listings in four years.
Some of the increase likely resulted from churn, or sellers switching real estate agents as the buying season approaches, McCrary noted. These switches create a new listing out of a home that may have been on the market for some time.
The March influx of 1,613 new listings also likely resulted in part from pent-up demand from owners who had postponed putting their homes on the market until conditions improved for sellers. They now feel optimistic enough to test the waters, Parnegg said.
The home price recovery varies from one MLS area to the next but is generally concentrated in the city of Albuquerque. Prices for detached, single-family homes essentially were flat in the first quarter in Rio Rancho and continued to drop in Valencia County.
The comparatively faster pace of price recovery in the city of Albuquerque is tied to it being the metro’s employment hub, thus buyers who put a priority on short work commutes look for homes there, McCrary said. The result is more robust buying and selling activity in Albuquerque than in outlying areas.
The low-key recovery is likely a factor in the subdued pace of house flipping in the metro – 20 flips, or less than 1 percent of home sales in the first quarter – according to foreclosure listing firm RealtyTrac. Nationwide, an average of 3.7 percent of home sales in the first quarter were flips.
Low flip rate
House flipping appears to be a common activity in cities where home prices are on the rise after crashing badly when the housing bubble burst. Examples from the first quarter are Jacksonville, Fla., at 10 percent, San Diego at 7.1 percent, Las Vegas, Nev., at 6.7 percent and Miami at 5.9 percent.
Over the past three years, the Albuquerque metro hasn’t seen much flipping, which is defined as a house that’s purchased and sold within six months. The same holds true for Las Cruces and Santa Fe, according to RealtyTrac data.
In the first quarter, New Mexico was tied with Alaska for having the fourth-lowest flip rate in the country.
Housing distress also continues to decline in the metro, although it’s still more prevalent here than on average nationwide.
The foreclosure rate in February was 2.6 percent for homes with outstanding mortgages, higher than the 1.9 percent rate nationwide, according to CoreLogic. The rate has dropped fairly steadily since peaking at 4.2 percent in April 2012.
The metro’s more than 90-day delinquency rate in February was 4.8 percent, equal with the rate nationwide, CoreLogic reported. Like the foreclosure rate, the delinquency rate has dropped fairly steadily since peaking at 6.8 percent during several months in the first half of 2012.