I have a high-end home in High Desert in Albuquerque (800K price range). My husband and I plan to retire to

Asked by Jonny Johnson, Albuquerque, NM Wed May 21, 2008

Although I keep hearing that prices are appreciating in Albuquerque we have witnessed the houses in High Desert selling for less and less over the last 18 months. When I ask realtors about what they think will happen in the Albuquerque market they seem to already have the same scripted answer that they don't have a crystal ball, and therefore could not tell me if my house is going to keep declining in value over the next year or two years We are nervous about a price decline, this is what we are counting on for retirement. So while we recognize that nobody has a crystal ball, everybody does have an opinion. That is what we want, your opinions as qualified, experienced realtors. We could sell our house now and rent a small apartment, or we could wait for another year or two. What is your OPINION about what will happen in the market in High Desert in the short term? Please provide contact info for follow ups.

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Ken Skillern, , Albuquerque, NM
Wed May 21, 2008
Just sharing some thoughts here. Our economy is usually in about a 10 year cycle: Growth, Peak, Decline, Trough, etc. I think we are in the "Decline" phase. The last occurred in 2001-2002, so this may have been a bit shorter than usual. This has implications for all capital markets including real estate. If one were to use the assumption that the trough is next, and that we are in mid-Decline, one may surmise that 2010-2014 will be Growth years. One could also conclude that until then, residential resale real estate prices as a whole, excluding certain local markets, are in for more decline. There are events that may alleviate the pain, however. The lowering of interest rates has an effect of lowering mortgage rates, which in turn makes it easier for a borrower to obtain money to buy a house. However, with a massive supply of homes on the market, it makes sellers lower prices to attract those buyers until we work through this massive inventory. The number of baby boomers retiring in the next five years is enormous. And many baby boomers want to downsize by selling their large, expensive homes and buying smaller, less expensive homes. This competition has a downward effect on the price of a home for sale. There are upward forces on the prices of homes as well, but currently they are not very strong.

Rule of Thumb: Plan on 1 month on market for every $100K of price. Subtract or add a month for every 10% you are below or above the true market value for your home. Thus, if your home's true market value was $800,000 and you listed at $880,000, plan on about 9 months to sell your home. Now, in reality, it may take less, but this is just a planning figure to give you something with which to tentatively plan your life.

The decision to sell or keep your home is a tough one, and involves tax, legal, social and other financial considerations that only you can weigh. But if you are trying to make a decision based solely on market timing, I think that this market will bottom sometime between 2009 and 2010. Until then, we are likely to see a gradual decline in the prices of residential resale real estate. If I had to guess, I'd predict about another 15% decline for some real estate markets, including Albuquerque.

Hope these thoughts help, but again, I'm a broker, not an economist, banker, lawyer, tax adviser or anything else, so seek professional guidance by all means.
1 vote
Bruce Shah, , Albuquerque, Corrales, Rio Rancho
Wed May 21, 2008
First of all, prices are NOT appreciating here. Equally true, however, is that we are not remotely in the kind of distress other locales are experiencing. And, if that sounds to you like 'damning with faint praise' I won' t argue!
High end sales in the area have slowed dramatically for two reasons: the high cost of non-conforming loans (the Jumbos that everyone hears about) and the drying up of the pool of potential buyers for those homes. (The areas that normally serve as our 'source' are precisely those hit hardest by the subprime debacle and the dramatic increase in foreclosures.)
Both situations are temporary in the sense that they won't last forever. ALL markets are cyclical. (The investment part of your home is no different than the stock market.) From the tenor of your comment, it sounds like you don't HAVE to sell right now. So, sit tight and don't read local real estate news for about one year :).
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Josiah Hooten, , Bernalillo County, NM
Wed May 21, 2008
In the last 20 years Albuquerque has seen steady growth, only seeing a loss once (2% in 2001 I believe). In my opinion, even the national market (excepting those areas that were/are WAY over inflated) will not go down. Real Estate has historically always been a great investment, and I sincerely believe it will stay that way.

However, if you feel that you could sell now, and walk away with a healthy profit you may want to way in the risk-vs-potential gain. If you are going to sell in the sort-term (less than 2 or 3 years) How much gain would be worth the risk? In my opinion, in our market 5 - 10% growth in the short term is probably the best you could hope for. I'm sure you would invest your profits, likely in an investment more stable than real estate. How much interest would be gained on that investment? If you were to subtract that rate from my guesstimate, are you looking at enough profit to "chance it"?

If you would like to have coffee and let me play devils advocate for both sides of your decision, it would be my pleasure!

Josiah 505-288-1527
Web Reference:  http://www.casacrazy.com
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