New Mexico Real Estate Market Trends & Analysis


The New Mexico real estate market represents the aftermath of an economy that has struggled to get back on its feet.  If for nothing else, real estate in New Mexico hasn’t been able to realize its full potential since the latest recovery initiated.  While things are certainly better off than they were just a few short years ago, there’s plenty of room for improvement.

Nonetheless, resulting market conditions lean heavily in favor of everyone participating in the market: buyers, sellers and investors.  Sellers are benefiting from a unique combination of demand and available inventory and buyers have seen median home values remain relatively affordable in the face of appreciation. Investors, on the other hand, have been able to capitalize on New Mexico’s incredibly high foreclosure rate.    

The Top New Mexico Real Estate Markets


While the best real estate market in New Mexico is up for debate, here’s a list of the cities investors may want to pay special considerations to:

New Mexico Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Escrow
Conveyance: Warranty or Quitclaim Deed

Foreclosure Procedure

Primary Foreclosure Method: Judicial
Process Period: 4 - 6 months
Notice of Sale: Court
Redemption Period: 9 Months

Taxes

Income Tax: 1.7% - 4.90%
Corporate Tax: 4.8 - 7.60%
Sales Tax: 5.13%
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 0.55%
Property Taxes by County: http://www.tax-rates.org/new_mexico/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,516.00
Transfer Fee: no fees
Origination Fee: $1,761.00

Overview


  • Median Home Value: $206,353

  • 1-Year Appreciation Rate: +5.3%

  • Median Home Value (1-Year Forecast): +4.5%

  • Median Rent Price: $1,250

  • Price-To-Rent Ratio: 13.75

  • Average Days On Market (Zillow): 81

  • Unemployment Rate: 4.7% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 2,095,428 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $48,059 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 14.84%

  • Foreclosure Rate: 1 in every 2,613 (3.8%)

Median Home Prices In New Mexico


Approximately seven years ago (February 2013), home prices in the New Mexico real estate market bottomed out during the Great Recession. At the time, the average price of a home in New Mexico was about $163,000. Unbeknownst to residents, however, the first quarter of 2013 marked improvements in the economy of many housing markets across the country, not excluding New Mexico. Though they weren’t aware of it then, prices would start to appreciate at a historical rate.

Thanks to nationwide improvements in the economy, growing optimism and a lack of available inventory, prices in New Mexico have enjoyed nearly a decade’s worth of growth. As a result, today’s median home value is somewhere in the neighborhood of $206,353, or 26.5% higher than where it was when the recession was at its worst.

An appreciation rate exceeding twenty-five percent is nothing to scoff at. In fact, seven consecutive years of price appreciation have really helped to bolster the New Mexico economy. However, when placed in a greater context, real estate in New Mexico has failed to keep pace with national trends. To put things into perspective, the median home value in the United States was around $167,000 when New Mexico real estate hit rock bottom (February 2013). Since then, the median home value in the United States appreciated 46.1%. Today, the median home value in the U.S. is a healthy $245,193. While New Mexico homeowners do have something to be excited about, it is important to note that there is plenty of room for improvement.

Over the course of last year, the New Mexico housing market has done its best to catch up to the national recovery. Thanks, in large part, to boasting a median home value well below the national average, prices in New Mexico were able to appreciate by as much as 5.3% in as little as one year’s time (December 2018 to January 2020). Over the same year, the median home value in the United States jumped a slightly more modest 3.8%.

As prices continue to increase, it’s fair to assume appreciation rates will level out. Over the next 12 months, however, it’s reasonable to assume real estate in New Mexico will continue to appreciate faster than the national average. Therein lies the real reason the New Mexico real estate investing community should remain encouraged: there’s still room for growth.

Median Rent Prices In New Mexico


Rental prices across the country remain highly influenced by home values, and are—therefore—subject to market fluctuations of varying degrees. Subsequently, there is a direct correlation between higher rental rates and increasing home prices; the same can be said about decreases, too. For better or for worse, home prices will impact the direction rental rates head, and the New Mexico real estate market is no exception.

Though not as pronounced as the increases made by their home price counterparts, rental rates in the New Mexico housing market have done their best to follow suit. In fact, rental rates have increased every year since the market bottomed out in the first quarter of 2013, too. At the time (February 2013), tenants spent an average of $1,116 a month on rent. Today, the median rent in New Mexico is approximately $1,250, or 12.0% higher than it was at the depths of the last recession.

To put things into perspective, the median rent price in the United States increased slightly more than twice the rate of New Mexico. Over the last seven years, the median rent price across the whole country increased 24.2%, and is now $1,650.

Again, it is important to appreciate the steps taken by the New Mexico real estate market. A 12.0% increase in as little as seven years represents marked improvement. However, it’s clear (based on what the rest of the country has done at the same time) that real estate in New Mexico still has areas to improve upon.

New Mexico Foreclosure Trends & Statistics


While home prices aren’t on par with national trends, real estate investors in New Mexico are starting to grow accustomed to the city’s profit margins, or lack thereof. If for nothing else, seven years of historic appreciation have made it harder to acquire deals with high profit margins. It is worth noting, however, that the same price increases that have eaten into potential profit margins have also led to more foreclosures.

With one out of every 2,613 homes in some state of foreclosure (pre-foreclosure, bank-owned or reserved for auction), New Mexico has a foreclosure rate of about 3.8%. When placed in a national context, the New Mexico housing market has a relatively low foreclosure rate. The foreclosure rate across the entire United States is about 4.4% (one in every 2,253 properties).

The disparity between the two markets only appears to be growing. While foreclosure filings across the U.S. were on the downtrend a few years ago, they have picked up as of late, increasing approximately 7.0% year-over-year. As recently as January, however, “the number of properties that received a foreclosure filing in NM was 11% lower than the previous month and 20% lower than the same time last year,” according to RealtyTrac.

Despite recent drops in foreclosure filings, there are still pockets of distressed inventory with higher distributions of foreclosed properties across New Mexico. Here’s a list of the counties with the highest distributions of foreclosures in New Mexico:

  • Valencia: (1 in every 1,287)

  • Sandoval: (1 in every 1,676)

  • Torrance: (1 in every 1,598)

  • Curry: (1 in every 1,756)

  • Dona Ana: (1 in every 1,796)



Tax Lien Investing



  • Tax Lien or Deed: Tax Deed state (with challenge possibility)

  • Redemption Period: Sale can be challenged for up to 2 years after sale

Real Estate Investing In New Mexico


The New Mexico real estate market boasts several fundamentals working heavily in favor of investors. Not unlike the majority of the United States, New Mexico real estate investors have enjoyed a lucrative run since the last recession. Real estate investors and homeowners across the country, in fact, have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ most recent Home Sales Report, the average home seller in 2019 “realized a home price gain of $65,500 on the typical sale, up from $58,100 last year and up from $50,027 two years ago.”

The report acknowledges that profits “represented a 34 percent return on investment compared to the original purchase price, up from 31.4 percent last year and up from 27.4 percent in 2017, to the highest average home-seller ROI since 2006.” Simply put, average U.S. home seller profits are higher than they have been in approximately 13 years. Consequently, the New Mexico real estate investing community was not left out of the latest trend.

While home values are reaching new highs just about everywhere in the United States, the New Mexico real estate investing community is granted access to a relatively affordable inventory of homes. Of course, homes are more expensive than they have been in a long time, but the local distressed property market appears ready and willing to supply investors with affordable deals. Distressed properties award savvy investors the opportunity to simultaneously capitalize on attractive profit margins and motivated sellers.

Instead of dealing directly with homeowners, however, real estate investors in New Mexico should place an emphasis on talking to local banks and loan providers. If for nothing else, the majority of the city’s distressed inventory is bank-owned. Representing 38.6% of the state’s foreclosed properties, bank-owned homes are the most abundant source of distressed homes. Therefore, it’s reasonable to assume bank-owned homes will give investors the best odds of finding a deal below market value. That said, pre-foreclosures aren’t far behind. Inventory that is merely at risk of falling into foreclosure, but is nonetheless owned by a motivated seller, makes up 34.9% of the distressed property market. The remaining distressed homes are reserved for auctions, can be acquired by the highest bidder.

Each of these options represent an opportunity for the New Mexico real estate investing community. Local investors, therefore, need to exhaust all these options to place the odds in their favor. However, knowing where to find deals in New Mexico is only part of the equation. What should investors do with the deals once they have them? Is now a good time to invest in real estate in New Mexico? The answer is a resounding yes, as long as the appropriate steps are taken.

To be clear, the New Mexico real estate market is firing on all cylinders at the moment. Nearly every exit strategy is in play, but there’s one that makes more sense with regards to today’s market indicators: rental properties. While it’s entirely possible to make profits rehabbing and wholesaling, the higher acquisition costs associated with 2020 have made attractive profit margins harder to come by. Instead, investors should look into building a rental property portfolio. Years of cash flow can very easily offset today’s higher purchase prices.

New Mexico Housing Market Predictions


The New Mexico housing market has enjoyed nearly a decade’s worth of good news. For seven consecutive years, real estate in New Mexico has been able to ride the wake of national trends, albeit to a tempered extent. Price increases, confidence in the market and several other indicators are heading in the same direction as the rest of the country, but what does that mean moving forward? What can the New Mexico real estate investing community expect for the foreseeable future?

  • Roswell should attract more first-time buyers: While the median home value in New Mexico is below the national average, prices are still higher than they have been in a long time. As a result, it’s safe to assume a growing number of residents in New Mexico will seek out more affordable cities to live in like Roswell. Already one of the largest cities in the state, Roswell has plenty of demand, but the city’s current median home value of $105,380 should increase demand on behalf of budget-conscious buyers.

  • Inventory levels will continue to drive up prices: Inventory levels have yet to match the pace of demand, which will only serve to stir up more competition. While great news for current owners, more competition will only increase acquisition costs for buyers. Nonetheless, help is on the way. More inventory should be added sooner rather than later, but expect prices to rise in the meantime.

  • Optimism will grow even more: Sentiment towards the New Mexico real estate market has improved dramatically in a relatively short period of time. What’s more, the strengthening economy will serve to increase people’s optimism even more.

New Mexico Real Estate Market Summary


The New Mexico real estate market has enjoyed a historical run while riding the tailwinds of the national economy. Propped up by consumer confidence and a strengthening job market, real estate in New Mexico has done well for itself since the recovery began approximately seven years ago. That said, there’s still plenty of room for improvement. While things are going well for buyers, sellers and investors, a distinct lack of inventory has prevented the local market from reaching its full potential. Until more homes are placed up for sale, it appears as if New Mexico will be held back.

Sources:



https://www.attomdata.com/news/market-trends/home-sales-prices/attom-data-solutions-year-end-2019-u-s-home-sales-report/
https://www.attomdata.com/news/market-trends/mid-year-q2-2019-foreclosure-market-report/
https://www.census.gov/quickfacts/fact/table/NM/PST045218
https://www.bls.gov/regions/southwest/new_mexico.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/nm/
https://www.realtytrac.com/statsandtrends/nm/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/nm/home-values/
https://www.zillow.com/home-values/
https://www.zillow.com/roswell-nm/home-values/
https://www.nmrealtor.com/wp-content/uploads/2020/02/January.pdf
https://www.truthinaccounting.org/library/doclib/FSOS-booklet-2019.pdf

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