Sorry to have to correct you Ardvark, but - in fact - the inventory is down significantly. Here are the actual numbers for residential property for sale in Santa Fe County for each of the past 3 months:
March 1592 1340
April 1652 1366
May 1710 1404
This reduction in inventory is similar when we just look within the city itself:
Comparing the same three month period, in March 2011 the number for sale was 824. This March: 689.
In April it was 849 in 2011; this year it was 685. And for May it's 706 this year vs. 874 for last year.
Now I'll try to correct other misinformation:
Days on Market: in May of 2011 it was 217; in May of 2012 it was 184
Average Price per Square Foot: in May of 2011 it was $200; in May of 2012 it was also $200.
These figures will fluctuate from month to month. If we look at the comparison for the past 15 months, then we'd see that the average price per sf sold was down 12.5%, and the days on market was down 15.4%.
Another factor to consider is the interest rate on a mortgage. Rates are at their historic lows right now. For every 1% increase in mortgage rates, the affordability goes down by 10.75%. In other words, someone who could qualify for a $300K house at 4% interest, would only qualify for a $270K house if the rates went to 5%.
I'm not sure where you're getting your information from, but it's important for you and other readers of this forum to have up-to-date and correct data so you and they can make decisions based on facts, and not hearsay. And without being negative towards Zillow or Trulia, the best source of current, correct information is a good Realtor.
Your advice to use an accountant or tax attorney to evaluate costs and benefits is good advice, especially when one wants to know the tax advantages of a property purpose for their unique circumstances. Still, there's no reason why a Realtor's estimate can't be useful as strictly an estimate of monthly costs.