Just how healthy is Hobbs’ housing market?
It is a question that lies at the center of the City of Hobbs’ housing incentive program and one that may have begged asking two weeks ago when Commissioner Marshall Newman quoted a figure of 269 homes on the market in Hobbs before voting against setting aside $400,000 in incentive funds for new homes under development at Zia Crossing subdivision north of Hobbs.
Newman said he voted against the incentives because of the number of the homes on the market and the current state of the city’s budget with falling gross receipts tax revenues from the slumping oilfield.
“I was looking at the fact that we have close to 300 homes on the market at the current time and I don’t see a whole lot of people moving in,” he said. “And, given our current decline in revenues, I just didn’t feel like now was the right time to do an additional incentive to put additional homes on the market.”
Marshall said he hopes the incentives work for Zia Crossing, but said he is unsure if the market will bear it out.
How is “healthy” measured?
According to Total Mortgage (www.totalmortgage.com), there are a number of ways health of a housing market is measure.
One measure is called “Month’s Supply” which is how fast it would take all
homes currently on the market to disappear at the current rate of purchase.
A time frame of six months is considered healthy.
With 223 homes on the market in Hobbs at the current rate of about 30 homes a month, Hobbs’ market has a 7-month supply.
Time on market is the second indicator and 90 days is considered a national average for a healthy market, according to the website.
Finally, a series of factors known as “list-to-sale,” “sale-to-list,” and “list-to-close” are a final measure. Those factors, in essence, give a percentage rating to how close homes sell to the asking price. Home markets with sales around 100 percent are considered healthy. A percentage above 100 is a seller’s marker and below 100 a buyer’s market too high or low either way and the market is unhealthy.
Number of homes
Is Hobbs’ market healthy? The answer is not a simple yes or no, but the answer is much closer to “yes” now than it has been in years.
“We probably have as healthy a market as we have had in many years,” said Hobbs Realtor Bobby Shaw, citing there are 223 homes listed for sale in all of Lea County. That number could climb by some 50 homes when adding in those being sold by the owners.
“My personal opinion is we should have somewhere around 400 or so,” Shaw added of the number of homes Hobbs needs on the market. “There was a time when there probably wasn’t 47 across the whole county. That’s unhealthy. People have to have a choice.”
Currently, there are 34 homes on the market in Lea County priced under $100,000. Shaw said just last year there were no more than five in that price range — a price that is needed to meet the demand for workers on the lower end of the pay scale.
There are currently 108 homes in the $100,000-$200,000 price range, 56 in the $200k-$300k range and 25 in the $300k-$1 million range.
Leon Ivie, project manager for Zia Crossing, possibly Hobbs’ fastest-growing subdivision, has built subdivisions in markets across the country and Hobbs’ market is still not his estimation of healthy, but it is getting there.
“We would consider a market of 43,000-50,000 (population) needs a minimum of 500 homes on the market,” he said. “A healthy community like we are building, within three years 10 percent of our homes should be on the market for resale — that is healthy turnover. We have built 192 homes. We should have 20-25 on the resale market and we have two.”
He said the 10 percent turnover is an expected average nationally and the fact his Hobbs project isn’t seeing that much turnover is a sign the market isn’t yet healthy enough to allow for enough migration.
“There needs to be more rental single-family homes than there is,” he said. “The market is still showing a housing shortage when you still have two-four generations living in one home. We need enough housing where these people can gain some independence.”
Time on market
According to Gretchen Koether, president of the Hobbs Realtor’s Association, the average time for a home on the market in Hobbs is 120 days, but that is not necessarily a sign of a bad market.
“It is taking us longer to close now because of the new federal regulations,” she said. “Last year we could have closed a home in 45 days on the outside, now if we do so in 45 it is lucky. It is usually taking 60 days from getting a contract to closing now and it is often longer than that.”
By comparison though, Koether said the time listed has dropped, a possible sign homes are still selling quickly, just not closing fast.
Looking at numbers back to 2013, home sales remain relatively flat with about 35 homes sold countywide each month and about 60 homes coming onto the market each month.
Ivie said during last year’s oil boom his company was selling an average 12 homes a month. It has slowed to 7-8 a month, but to stop now would be to invite disaster, Ivie said.
“If we were to stop building and wait for oil to come back, and it will, then you (as a community) are behind the 8-ball again,” he said.
Home pricing and movement
Looking at the percentage rating used for measuring a housing market, the Hobbs market is coming in around 95 percent, meaning homes are selling slightly lower than asking price, an indication the market is a buyer’s market — something Hobbs’ market hasn’t been in 3-4 years.
“We are dealing with a new dynamic here,” Shaw said. “Lea County has changed so drastically over the last five or six years, due to one fact — new construction. Previous to all this, when someone wanted to buy a house, they had to look at an older house built in the ‘70 or early ‘80s. Very few people could get a new construction without ordering a custom build.”
Now new homes are becoming available thanks in part to the city’s incentive program and it is not only causing migration as owners of older homes upgrade to newer properties, but driving down the price of older homes, both of which are good for a market even though it may not thrill those selling older homes.
“It is really affecting the older house market,” Shaw said. “The give and take is the buyer will sacrifice 300-400 square feet to get something new. You can spend $200,000 on a larger older home or sacrifice some space for a newer one. It is a dynamic we have never had before, which is my opinion makes it healthy here. It makes me, as a home seller, be more competitive to update and clean my property up.”
Ivie said housing selection is still wanting from his viewpoint.
“I would say you are still very lacking in selection,” he said. “If you look at the number of listings and the conditions, you have to consider 40-50 of those homes are not livable without a major infusion of cash.”
A bust turnover isn’t happening - yet
Some might expect the oil bust to be causing an influx of repossessed properties to hit the market, but according to Shaw, the multiple listing service shows only eight repos listed and he estimates at most there may be 10 more coming in the next month.
Ivie too said turnover of Zia Crossing homes just isn’t happening since only two are up for sale.
“We have a lot of people who bought in here, they were making a lot of overtime and now they are not,” he said. “A few of the wives have had to go to work, but they haven’t packed up and left town. It is retaining the people in town.”
So a bust turnover isn’t happening, at least not yet in the home sales market. It is in rental properties though, Koether said.
“I work with a lot of apartment owners and they are freaking out,” she said. “They are seeing 50 percent occupancy rates and their prices have been cut drastically just to keep people in them.”
It sounds bad for rental owners, but considering that for the past three years occupancy rates ran near 100 percent and rents were estimated at double what would normally be expected, renters have been riding a high wave that is finally leveling out.
If the oil bust continues for too long the number of foreclosures could increase, but so far homes are still being bought and held onto.
By the numbers
Looking at a broader area, Lea’s housing market seems about in line now with neighboring counties with smaller populations.
Lea has about 270 homes on the market in all, with a population of about 71,000, according to the U.S. Census Bureau.
By comparison, Eddy County, with its some 55,400 residents, has 240 homes on the market and the mirror imaging gets closer.
Lea has 34 homes under $100,000. Eddy has 43. Lea has 108 homes in the $100,000-$200,000 range. Eddy has 106. Lea has 56 homes in the $200,000-$300,000 range. Eddy has 52.
That’s a narrow margin for a county with nearly 20,000 fewer people and an unemployment rate that is 3 percent lower than Lea’s at 6.7 percent.
Lea’s neighbors to the north, Roosevelt and Curry counties, combining the towns of Portales and Clovis, have 70,553 residents and 507 properties on the market with about double the homes in every category compared to Lea.
How fast homes are moving in Eddy and Roosevelt/Curry counties is unclear.
What is clear, at least to Ivie, is that the Hobbs housing incentive is essential to keeping builders in Lea and the community ready for the next oil boom.
For instance Ivie said Zia Crossing is in the midst of permitting a 45-unit gated community for 55-plus aged residents and demand is high.
“We have had a tremendous amount of interest,” he said. “What is nice about this is it isn’t related to the oil. These are older people who want to downsize, but don’t want to move to Lubbock or some place like that.”
And even with regular home sales taking a dip, Ivie said keeping the incentives and keeping builders building is essential to getting Hobbs’ housing market to a healthy level that can be maintained and part of that is because it helps keep costs on homes down for buyers.
“Those incentives are a pass-through to the buyer. The buyer will save, on average, about $9,500 because of them,” he said. Those incentives reimburse the builder for the installation of public utilities, such as water and sewer lines.
1,000 more homes
Ivie’s final word on Hobbs’ housing market echoes what the community heard from University of New Mexico researchers just two years ago, that Lea is still woefully under-housed — the report estimated Lea needed 1,200 new homes just to meet its population in 2014 and the county is growing some 2 percent annually even in non-boom years.
“I think we could easily build another 1,000 homes in the next 4-5 years and this market would still not be flooded,” Ivie said.
Levi Hill can be reached at 391-5438 or by email.