Until the current financial crisis New Mexico didn’t have to deal with much fall out from nationwide economic events since government jobs account for nearly a fifth of the state’s employment.
Low mortgage rates have fueled a surge in home sales with government tax credits. The increase in sales is beginning to show that markets in New Mexico will recover from the housing crash in time. The government orchestrated rise in housing sales may act to halt alarming price deflation and help to stabilize markets.
In Albuquerque buyers hurriedly worked to close transactions before the first time buyers’ tax credit expired only to have it extended and expanded to move-up buyers. The credit triggered an upsurge in sales that may be hard to equal as home values continue declining in the states biggest market.
Fueled by massive growth Albuquerque drew new employers during the boom only to see a drop in new home construction as the financial crisis struck. The inventory of foreclosures and bank assisted troubled home sales now fuel the market, which will sustain higher housing deflation without additional government intervention. For now Albuquerque home prices are forecast to decline 9.1% in 2010.
In Las Cruces, the state’s second largest urban area foreclosures are projected to increase the inventory of homes in the early part of the year as bankers become more anxious about homeowners in default. The rise in foreclosed properties will offer buyers a bevy of bargain basement priced properties to choose from at the expense of the local economy. More than 1 out of 5 New Mexico mortgage holders are currently behind on their mortgage.
As more homeowners lose faith in the fact that their equity has eroded and the housing market, more will walk away from homes and slow Las Cruces from stabilizing. The over-supply of homes will put a drag on the market larger than it existed before sales rose with government tax credits. Move-up buyers lack the equity in their homes to make a move. Las Cruces is forecast to sustain average housing deflation of 10.3% in 2010.
The energy boom helped to supply a new round of home buyers, but since energy producing markets have slowed oil rigs have been idled and job cuts are impacting the local economy.
In Santa Fe home prices have been crushed by the collapse of the housing market as vacation homeowners walk away from homes in rising numbers, leaving them to foreclosure. However, thee federal tax credit has acted to aid the market with improving home sales, particularly in the lower end of the market.
The past tourist season was slower in Santa Fe, and more foreclosures are projected to pull housing prices down further even as home sales rise in the coming year. The subculture of free thinkers and artists attracted to this tourist town are beginning to rethink their place in the northern desert oasis. However, as the market makes inroads towards stabilizing conditions should improve in Santa Fe, which is forecast to sustain average housing deflation of just 4.7% in 2010.