This is the first column in a two-part series.
To say that residential real estate is in a state of flux may very well be an understatement. In a press release issued on July 20, the National Association of Realtors reported that existing home sales “declined for the fifth straight month.” More specifically, sales fell 5.4 percent between May and June and fell 14.2 percent year-over-year. .NAR also reported that the national inventory of existing homes is increasing.
Just nine days later, the US Census Bureau released statistics showing that new home sales fell 8.1 percent between May and June, and by 17.4 percent year-over-year. It is interesting to note that new home statistics are based on the date the purchase agreement is signed, while existing home numbers count closed sales for which purchase agreements were signed 30 to 60 days in the past. The reports also revealed that price appreciation is slowing down in many parts of the country.
Las Cruces is not immune from the effects that higher mortgage rates and other economic factors have on sales of new and existing homes, townhomes and condominiums. According to an August 2 report by the Las Cruces Association of Realtors, leading indicators show the extent to which Las Cruces-area sales are affected. Take for example the percentage of asking price received from sellers. The list-price-sales price ratio achieved in July was 1.5 percent below the percentage achieved in June and half a percent below the percentage achieved a year ago. Other statistics confirm that change is definitely underway.
The number of days on market, which reflects the number of days between the day the listing was activated and the day the purchase contract was signed, is up 50 percent month-over-month and 80 percent year-over-year -years grown. The absorption rate, which measures the number of months it takes to sell out of inventory at the current sales pace, grew 9.5 percent month-over-month and 12.2 percent year-over-year.
The percentage of unsold inventory also increased, increasing by 40 percent between June and July and by 10.5 percent year over year. LCAR also reported that the dollar volume of homes sold in July fell 8.9 percent below the dollar volume in June and 15.1 percent below the total sales volume in July 2021. July dollar volume was $60,332,774.
There’s no doubt that inventory is growing, sellers are getting a lower percentage of their asking prices, and it’s taking longer to find a buyer. But what about values? According to national statistics, it seems that they have reached their peaks in many areas of the country. Is the same true for Las Cruces? Have prices reached their peaks in many areas of the valley? The answer is complicated and depends on the type of property, its condition and its location. Although there are not enough buyers in the market to purchase our entire inventory, there are more than enough to purchase the small number of “best homes for the money” that our inventory has to offer. In that realm, sellers continue to hold an advantage.
There’s one statistic that doesn’t establish a trend by itself, but could point to what’s ahead for local home values if it continues. This statistic is the median sales price. The median selling price is where half sold for more and half sold for less. While July’s median sales price of $289,500 was 5.6 percent higher than the median sales price reported in July 2021, it was 3.4 percent below June’s median price of $294,300. Should that trend continue, it would indicate that local home values are on the decline.
So, let’s assume that local home values soften. What strategy or strategies should sellers use to achieve the highest possible price for their properties? I have the answer for you in next week’s column.
Gary Sandler is a full-time Realtor and President of Gary Sandler Inc., Realtors in Las Cruces. He is happy to answer questions and can be reached at 575-642-2292 or Gary@GarySandler.com.
