Affordable mid-market and starter homes as well as rental units near transit and bike paths for young adults, remain potential gold mines for developers who figure out the right balance of price, land costs, location and amenities, a speaker told the lunchtime crowd Monday at the NAIOP New Mexico February program.
While Albuquerque is primed to welcome more retirees, millenials and investors in rental properties, it still needs to to get more shovel ready land onto the market for the kinds of mid-priced single-family homes that a cross-section of buyers can actually afford, said John Covert, director of Metrostudy’s Colorado-New Mexico Region.
John Covert, Director of Metrostudys Colorado-New Mexico Region. (Courtesy Metrostudy)
Covert, who lives in Denver, regularly meets and consults with many of the top home builders in the Albuquerque metro area, as well as with lenders, developers, investors, suppliers, utilities, school districts, and local governments concerning trends in the local economy and their effect on the real estate market.
Albuquerque‘s new home construction rate currently lags other Western cities where economies are more robust.
Covert said that of the 6,000 lots available for single-family home construction in the metro area, only 1,800 of the parcels fit the bill. “Finding finished lots are a challenge,” Covert told the crowd, which includes members of the city’s commercial real estate development community. That means developers will more than likely build homes exceeding $250,000 in order for their investments to pencil out.
The upshot: as the supply of available homes tighten, prices rise and mortgage rates budge slightly, buyers will gravitate to existing homes, which are more affordable at the starter price points, said Covert.
The regional residential real estate update also featured Todd Clarke of New Mexico Apartment Advisors and Bob Grassburger, an assistant professor at UNM in organizational consulting and applied research.
Clarke detailed the growing interest in the multifamily housing market by local and out-of-town investors. He just accomplished a first: listing and selling a nicely remodeled fourplex for over $500,000. He forecasts more transactions in 2018, as sellers of older apartment units look to cash in, especially in Nob Hill and Old Town, both popular rental areas. These areas, with high bike, walk and transit scores, rate high with both baby boomers and millenials, Clarke said.
Grassburger spoke the benefits of attracting more retirees to New Mexico, especially those that “are healthy, wealthy and wise.”
His research, which focuses on the economic impacts of retirees, shows that every retiree household setting up in New Mexico creates “half a job.”
With stable “mailbox” incomes (money coming from pension or Social Security checks), retirees are strong contributors to to the state’s gross receipts tax fund and property tax rolls. Many retiring baby boomers, he said, also “are twice as likely” as other generations to launch businesses.
New Mexico is about 30 years behind Alabama, Arkansas and Texas — states that have strong marketing efforts to attract retirees, said Grassburger.
The current state budget proposes that $150,000 be set aside to research the feasibility of a similar marketing program, Grassburger said.