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 more than a decade ago. 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 for itself but lagged behind national indicators. With that in mind, let's take a look at how New Mexico's past performance may give us a better idea of what to expect moving forward.
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:
Unemployment Rate: 4.5% (latest estimate by the Bureau Of Labor Statistics)
Population: 2,115,877 (latest estimate by the U.S. Census Bureau)
Median Household Income: $51,243 (latest estimate by the U.S. Census Bureau)
Foreclosure Rate: 0.08%
New Mexico Median Home Prices
Nearly a decade 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. While residents may not have known it at the time, the first quarter of 2013 marked a turning point for the New Mexico real estate market. In the time that has passed, home values have increased for nearly 10 consecutive years.
Today’s median home value is somewhere in the neighborhood of $296,833, or 80.0% higher than where it was at the end of The Great Recession. While real estate in New Mexico has done nothing but appreciate over the last 10 years, the fastest increases have taken place during the pandemic. Since the first quarter of 2020, when COVID-19 was officially declared a global emergency, the median home value in New Mexico has increased by 41.3%. In the last year alone, prices in New Mexico jumped 17.4%. To put things into perspective, the median home value in the United States increased by 40.6% since the beginning of the pandemic and 18.2% over the last year.
Appreciation rates in the New Mexico real estate market are roughly in line with national trends. Over the rest of 2022, it's safe to assume trends will play out similarly. With that in mind, the state's relatively low inventory rate will continue to drive prices up—albeit at a slower pace than in recent history. While a distinct lack of listings will simultaneously drive up competition and prices, higher interest rates will keep more buyers on the sidelines than over the last few years. Ultimately, fewer buyers will be competing over listings. The activity will increase home prices, but at a slower pace than New Mexico homebuyers have grown accustomed to.
New Mexico Median Rent Prices
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 almost every year since the market bottomed out in the first quarter of 2013, too. Today, the median rent in New Mexico is approximately $1,237, or 9.5% higher than last year.
Over the last few years, home prices have increased at a faster rate than rents. However, with activity slowing and the potential for a recession looking more likely, it's safe to assume more people will turn to renting over the next 12 months. Not only are there too few listings to keep up with demand, but fewer people are likely to buy as mortgage rates increase. As a result, the rental market will see increased demand, and landlords will be able to raise their rents accordingly.
New Mexico Foreclosure Trends & Statistics
According to ATTOM Data Solutions' July 2022 U.S. Foreclosure Market Report, "there were a total of 30,358 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — down 4 percent from a month ago but up 143 percent from a year ago."
“While it’s encouraging to see both foreclosure starts and completions drop off a bit in July, it’s also worth noting that there may be some seasonality impacting the numbers,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “In eight of the last 10 years, Q3 foreclosure activity has been lower than the previous quarter, so we might just be seeing a return to a more normal seasonal pattern of delinquencies and defaults.”
Over the last six months, the New Mexico housing market has contributed its fair share of distressed homes to the national statistics. Over the first half of 2022, in fact, New Mexico foreclosures have increased by 48.0%. In that time, 768 homes filed for foreclosure, or one in every 1,225 housing units. The counties which contributed the most foreclosures per housing unit were:
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
New Mexico Real Estate Investing
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 in recent history. Real estate investors and homeowners across the country, in fact, have enjoyed large gains and attractive ROI (return on investment). According to ATTOM Data Solutions’ second-quarter 2022 U.S. Home Sales Report, "profit margins on median-priced single-family home and condo sales across the United States hit another new record of 55.5 percent following the largest quarterly gain in a decade."
“Home sellers in the second quarter continued to benefit from the rapid growth in home price appreciation the country has experienced over the past few years,” said Sharga. “While price growth may slow down as higher mortgage rates dampen demand from prospective homebuyers, home sellers should continue to profit from the record $27 trillion in homeowner equity in today’s market.”
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 that end, attractive profit margins are harder to come by for New Mexico real estate investors. As a result, local entrepreneurs may want to look into 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.
Despite rising 2.68 points over the last 12 months, interest rates remain relatively low; that means the cost of borrowing money is still attractive 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 who can't 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 ten 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 now that things are starting to slow?
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 $145,956 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 higher borrowing costs will bring down mortgage applications, there are still too few listings to account for all buyers. Therefore, prices will continue to rise, but at a slower pace than in recent history.
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.
The New Mexico real estate market is better off 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 may be able to weather a slowing housing market. In fact, New Mexico's trailing indicators may actually help it through today's inflationary marketplace.
*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.