New Mexico Housing Market: Full Speed Ahead in 2007

Economists expect the housing market to rebound in 2007 for most of the nation, while New Mexico home builders are also expecting a rebound after a sharp downturn in 2006.

Housing starts in the Albuquerque housing market were down 30 percent in 2006, says Jim Folkman, executive vice president of the Home Builders Association of Central New Mexico. But, believe it or not, Folkman says “that’s probably a good thing.”

That’s because local home builders were operating at full capacity prior to the slow down, after years of double-digit growth in their industry locally, Folkman says. Therefore, even with the brakes tapped hard in 2006, business was still brisk. This year, he expects it to rebound somewhat.

“We’re in the 13th year of a seven-year cycle,” Folkman says, joking about the longevity and strength of the area’s housing boom.

Nationally, though, the industry has had a tougher time. It’s expected to rebound this year, but some areas will take longer to recover.

“We may be bottoming out on the sales side,” said David Lereah, chief economist for the National Association of Realtors.

Sellers are “being a lot more flexible,” he said, and lower prices are bringing some home mortgage loan applicants back into the market. Home builders have cut back on production of new houses, which will “make for a much healthier market going forward,” he added.

David Seiders, chief economist for the National Association of Home Builders, expects house values nationally will decline about 1 percent in 2007. That’s not, he said, “a major threat to the housing wealth effect.”

In and around Albuquerque, the rise in prices is expected to slow this year, but not to reverse itself. Local realtors and economists say appreciation rates might be in the low single digits in 2007, instead of the 15- to 20-percent rate at which they rose in previous years.

In terms of buoying the national economy by supporting consumer spending, stock market gains have offset declining house values, said Martin Regalia, chief economist for the U.S. Chamber of Commerce. People are continuing to spend - good news since 70 percent of the U.S. economy is dependent on consumption.

“It just doesn’t look like the American consumer is going away,” Regalia said.

A few more months of price declines actually will be good for the housing market because they will make houses more affordable, Lereah said. This will open up the field to home mortgage borrowers from all income levels.
The housing market will grow in three-fourths of the country in 2007, Lereah predicts.

Markets in the rest of the country - including California and coastal resort areas from Delaware to Florida housing markets - “are going to experience some pain,” he said.

One thing helping to sustain central New Mexico’s housing market is a robust economy generally, especially in terms of job creation.

“Jobs equals housing and housing equals jobs,” Folkman says.

With the new Tesla Motors electric car company agreeing to set up shop in Albuquerque, fledgling Eclipse Aviation expanding beyond 1,000 jobs and Intel announcing it will invest $1 billion or more in its Rio Rancho facility, the metro area seems to have jobs aplenty.

This story compiled by Dan Shingler, editor, New Mexico Business Weekly, and Kent Hoover, Washington bureau chief for American City Business Journals, the Business Weekly’s parent.