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 Great Recession, which ended around the first quarter of 2012. Since then, the New Mexico housing market has performed admirably but lagged behind many national trends. Most notably, home values couldn't keep pace with what was happening around the rest of the country and demand left more to be desired. All things considered, the New Mexico real estate market did well, considering what it had to work with.

It is worth noting, however, that the COVID-19 pandemic has disrupted the housing sector on a national level. Activity within the real estate sector dropped off in the second quarter, and real estate in New Mexico was no exception. However, as a new normal is starting to form, New Mexico looks poised to come out on the other side of the pandemic stronger than when it went in. The temporary setback experienced earlier in the year seems to have provided real estate in New Mexico with a catalyst.

While there is still a high level of uncertainty and confidence in the national housing sector remains shaky, the New Mexico real estate investing community may currently be amid a generational opportunity. Today's market indictors, perhaps more so than in recent history, look to benefit almost everyone involved in the sector: buyers, sellers, and investors.

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: $210,141

  • 1-Year Appreciation Rate: +5.8%

  • Median Home Value (1-Year Forecast): -1.0%

  • Median Rent Price: $1,250

  • Price-To-Rent Ratio: 14.00

  • Average Days On Market (New Mexico Association of Realtors): 66

  • Unemployment Rate: 11.3% (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 9,096 (1.0%)

Median Home Prices In New Mexico


More than 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 $210,141, or 28.9% 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. Since then, the median home value in the United States appreciated more than 46.0%. Today, the median home value in the U.S. is  $248,857. While New Mexico homeowners do have something to be excited about, it is important to note that there is plenty of room for improvement.

Real estate in New Mexico was making up a lot of ground, but the introduction of the Coronavirus put progress on hold across the entire country. Unemployment shot up and confidence in the national housing sector was shaken. Home values took a hit, but it appears as if New Mexico was slightly more insulated than the rest of the country. In fact, homes in New Mexico have appreciated at a faster rate than their national counterparts over the last year—5.8% and 4.1% respectively. The difference in performance may be attributed to local unemployment rates. While the state did see a drastic spike in unemployment in April, the national unemployment rate fared much worse.

When the pandemic hit, the national unemployment rate jumped from 4.4% in March to 14.7% in April. New Mexico, on the other hand, saw its unemployment rate jump from 6.3% to 11.9% over the same period of time. While neither situation is enviable, the increase was much more prevalent on a national level. As a result, New Mexico seems to have fared slightly better than many other states across the country. More importantly,New Mexico may be on track to recover faster too. While the median home value in the United States is expected to drop 1.5% over the next 12 months, the median home value in New Mexico may only see a 1.0% dip.

It should be noted that the drops initiated by the Coronavirus are only expected to be temporary. Several market fundamentals, not the least of which include historically low interest rates and ent-up demand, suggest activity will return sooner rather than later. The catalyst the New Mexico real estate market needs to get going again doesn't appear to be far away. As a result, today represents a good time to buy. Prices are likely to start increasing, and there's a good chance buyers will be happy they took action before the end of 2020.

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. 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. The same price increases that have eaten into potential profit margins have also led to more foreclosures.

With one out of every 9,096 homes in some state of foreclosure (pre-foreclosure, bank-owned or reserved for auction), New Mexico has a foreclosure rate of about 1.0%. When placed in a national context, the New Mexico housing market has a relatively average foreclosure rate. The foreclosure rate across the entire United States is about 0.7% (one in every 13,691 properties).

The disparity between the two markets only appears to be growing. While both markets hav drastically reduced foreclosures over the last decade, New Mexico appears to be making the most recent moves. As recently as August, "the number of properties that received a foreclosure filing in NM was 10% lower than the previous month and 74% lower than the same time last year," according to RealtyTrac. The U.S., on the other hand, saw foreclosure filings decrease 81.0% from this time last year, but saw an increase of 11.0% month-over month.

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:

  • Otero: (1 in every 3,945)

  • Santa Fe: (1 in every 4,279)

  • Sandoval: (1 in every 5,015)

  • Bernalillo: (1 in every 6,194)

  • Torrance: (1 in every 7,990)


Unfortunately, drastic improvements made to foreclosure filing rates appear to be at risk. Foreclosures are already increasing on a national level, and it may only be a matter of time until they do in New Mexico. The financial crisis left behind in the wake of the Coronavirus will most likely force many homeowners into foreclosure. Forbearance programs won't last forever, and when they end it's fair to assume the latter part of 2020 will see an influx of distressed homes on the market. While unfortunate, investors who position themselves well today may be able to simultaneously help distressed owners and land a deal at the same time.

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.

to be clear, attractive profit margins are harder to come by for New Mexico real estate investors. As a result, local entrepreneurs may want to try a new approach to investing: long-term rental properties. While the Coronavirus has certainly taken its toll on the economy, new and emerging fundamentals appear to be leaning heavily in favor of landlords. In particular, there are two reasons investors should consider buying rental properties in today's market: interest rates and demand.

Interest rates are historically low, and the Fed has already announced it will keep them low for the foreseeable future. That means the cost of borrowing money is lower than in the past, and can help offset today's higher home prices. Lower monthly obligations will make rental rates look a lot more appealing over the course of several years.

Inventory levels in New Mexico are low, which means even people who want to buy can't. Those unable to purchase will be relegated to the renter pool, which increases demand for units. As competition rises, landlords will be able to charge a premium for their units. More importantly, they'll be able to pay down their mortgagees with other people's' money while the risk of vacancy is lowered.

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 $106,186 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.

  • Influx of suburban residents: Work-from-home trends have all but eliminated the need to live within close proximity to an office. As a result, it's highly likely we will see a lot of people trade expensive city living for cheaper, suburban alternatives. Secondary cities and suburban areas should see an uptick in demand, which could bode very well for investors ahead of the trend.

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, and the introduction of the Coronavirus has complicated things. The New Mexico real estate market is better than where it was at the depths of the last recession, but it's now confronted with an entirely new set of obstacles. Fortunately, the state appears resilient and could mount a recovery earlier than most states. As a result, the unfortunate pandemic may represent a buying opportunity and spark a catalyst for the state to get back on track.

Sources:


https://www.nmrealtor.com/wp-content/uploads/2020/09/august-stats-2020.pdf
https://www.attomdata.com/news/market-trends/home-sales-prices/attom-data-solutions-year-end-2019-u-s-home-sales-report/
https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm
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

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either expressed or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.