SAN FRANCISCO — California’s median price for an existing single-family house rose for the third straight month, a sign that the state’s battered real-estate market may be bottoming out.

The median sales price increased to $267,570 in May for a California home, an increase of 4.2% from April, according to a report released Thursday by the California Association of Realtors. The inventory of unsold houses continued to drop, to 4.2 months’ supply in May compared with 4.6 months in April and 8.7 months in May 2008. Prices were still well below their year-ago levels, down 30.4% compared with May 2008.

One explanation for the increase in housing prices is that fewer foreclosed properties are among those being sold, said Kirk Lesh, an economist for California Lutheran University’s Center for Economic Research and Forecasting. Banks tend to sell foreclosed houses at lower prices than do people selling their own homes.

California’s real-estate market, the nation’s largest, is seen as a barometer of the U.S. economy. Housing prices soared during the boom, and their plummet during the market’s collapse resulted in massive foreclosures and fueled the recession. Economists say the state’s housing market will lag behind the nation’s in recovering, so any indication of improvement in California bodes well for the rest of the U.S.

With Thursday’s report, real-estate experts said they were a bit more optimistic that the California market is healing. But they warned that the state’s 11.5% unemployment rate could result in more foreclosures and drive down real-estate prices again, as could lawmakers’ plan to slash more than $10 billion from state spending to close a $24 billion deficit.

The budget proposals include laying off thousands of state workers and cutting health and welfare programs for millions of Californians, as well as raising taxes. If enacted, they would further batter the state economy and, consequently, the housing market, said Mr. Lesh, the economist.

The Realtors’ report also said that 556,590 California houses were sold in May, up 35.2% from a year earlier. Sales may increase in coming months because prospective buyers believe the market is at a bottom, said Robert Bridges, a professor at the University of Southern California’s Marshall School of Business. “The ‘buy’ decision would be a wise one right now because those pricing levels are getting attractive,” he said.

Opportunity is knocking fairly loudly for many considering homeownership. Home prices have declined in many markets around the country and tax incentives and other inducements have first-time home buyers and others weighing the possibilities.

Home affordability, as defined by the National Association of Realtors’ Housing Affordability Index, stands near all-time highs, thanks to declining prices and historically low mortgage rates. Yet, while some consumers hold off on purchases as they attempt to catch the home-price bottom, they could miss the mortgage-financing opportunity of a lifetime.

Consider the weekly average yield spread between Fannie Mae’s 6.5-year bond to the “benchmark” 10-year Treasury note, a classic relationship that involves the cost of making mortgage loans to consumers. Before disarray in the financial markets, the spread ran about 1% above Treasury bonds, reflecting investors’ confidence that owning debt of bonds backed by Fannie and Freddie is nearly as safe as owning government bonds.

The spread began widening in July 2007 as the global financial crisis unfolded, then spiked to above 2% during the next year as the U.S. economy seized and credit grew scarce. It grew to a startling 2.5% late last year as bond investors’ skittishness about continued delinquencies and defaults-and that the risk of these mortgages had not been properly assessed-resulted in higher risk premiums and higher costs to borrowers.

Late last year, however, the Federal Reserve Bank stepped in with a promise to purchase $500 billion in Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities, and raised that figure to $1.25 trillion in March. The move, combined with loan-modification initiatives and other federal intervention, restored investor confidence in the secondary market and mortgage rates declined rapidly. The yield spread in March dropped to 1% and zero and then fell to an unprecedented minus 0.5% by early May.

This condition is certainly unique and, likely, short-lived. Statistically, when the yield spread deviates from historical norms, the chances are great it will return to those levels. That could quickly drive mortgage rates higher. How much is anyone’s guess, but if the cost of making a mortgage goes up by 1.5% so, too, might mortgage interest rates.

Yet, factor in some additional variables. The marketplace for bonds relies heavily on purchases by offshore buyers who remain skeptical as the global economy continues in flux. Then there’s the inflation-deflation conundrum. Many fear a deflationary spiral-with falling prices for goods and services that lead to falling wages-can still drag down a stabilizing U.S. economy.

Conversely, others believe inflation will kick in, ushering in higher consumer prices, including higher mortgage rates. How this issue shakes out will have important implications for interest rates.

One thing is crystal clear: the odds that mortgage interest rates will rise are much greater than any continued mortgage-rate decline. And for most home buyers, the cost of mortgage financing can be as important as the price of the home itself.

Customers waiting for the absolute lowest price on a house could miss a golden financing opportunity and the lowest overall cost of homeownership.

By Inman News, Wednesday, July 1, 2009.

An index tracking pending sales of existing homes inched up a barely perceptible 0.1 percent from April to May, but it marked the first time the index has posted four consecutive monthly gains since October 2004, the National Association of Realtors said today.

At 90.7, the Pending Home Sales Index was up 6.7 percent from a year ago. An index of 100 is equal to the average level of contract activity during 2001, the year NAR launched the index and the first of five consecutive record years of existing-home sales.

The index posted the strongest monthly gain in the Northeast, rising 3.1 percent to 80.9, up 6.8 percent from a year ago. The West also saw a 2.2 percent increase in the index from April to May, to 96.9, down 0.7 percent from a year ago.

The index slipped 1.7 percent in the South from April to May, to 92.6, which is a 7.9 percent gain from a year ago. The Midwest saw a 1.3 percent monthly drop, to 89.2, up 11.4 percent from a year ago.

Some contracts signed in May might not close in the weeks ahead because new rules for appraisals are delaying or derailing transactions, NAR Chief Economist Lawrence Yun said.

The appraisal rules, which went into effect May 1 and apply only to loans to be purchased or guaranteed by Fannie Mae and Freddie Mac, are intended to protect appraisers from coercion.

NAR claims the rules have led to an increased reliance on appraisal management firms, which in some cases are using appraisers who are unfamiliar with a neighborhood or using distressed and discounted properties as comparable sales for nondistressed homes.

A spokesman for a trade association representing appraisers, the Appraisal Institute, has said falling home prices, not appraisers, are the reason appraisals are coming in lower than sales price in some markets.

Rep. Travis Childers, D-Miss., and Rep. Gary Miller, D-Calif., are sponsoring a bill, HR 3044, that would grant NAR’s request for an 18-month moratorium on implementation of the appraisal rules, known as the Home Valuation Code of Conduct. The bill, introduced June 25, has been referred to the House Committee on Financial Services.

Yun also raised the issue of appraisals when NAR released numbers on existing-home sales for May. Although existing-home sales picked up slightly, the 2.4 percent increase was less than would have been expected from a previous rise in pending sales, NAR said.

Today Yun said he expects existing-home sales to trend up through the end of the year, with the usual variations in local markets.

At 171.6, NAR’s Housing Affordability Index is near a historic high in records dating back to 1970. The affordability index takes into account median home prices, interest rates and median income. A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home. The higher the number, the better.

The index hit an all time high of 178.8 in April. While it retreated some in May, the typical family would still have needed to devote only 14.6 percent of gross income to mortgage principal and interest on the purchase of a median-priced home — one of the lowest percentages on record, NAR said.

A family earning $60,800 could afford a home costing $296,700 in May with a 20 percent down payment, assuming 25 percent of gross income were devoted to mortgage principal and interest, NAR said.

The latest market forecast released today by NAR anticipates a 10.1 percent drop in median resale home prices this year, followed by a 3.8 percent rise in 2010. The median price of new homes is forecast to drop 7.1 percent this year, rising 4.3 percent in 2010.

Also, the forecast calls for resale home sales to fall 0.6 percent this year, with a 5.7 percent rise anticipated in 2010. New single-family home sales, meanwhile, are forecast to drop 33.1 percent this year, and to rise 14.3 percent in 2010.

The weekly average rate borrowers were quoted on Zillow Mortgage Marketplace for 30-year fixed mortgages decreased last week to 5.48%, down from 5.58% the week prior, according to the Zillow Mortgage Rate Monitor, compiled by real estate website Zillow.com®. Meanwhile, rates for 15-year fixed mortgages fell to 4.87% from 5.01%, and 5-1 adjustable rate mortgages also fell to 4.65%, down from 4.73 the week prior.

Mortgage Type Average Rate Average Rate
Week ending 6/29/09 Week ending 6/21/09 % Change
30-year fixed 5.48% 5.58% -1.8%
15-year fixed 4.87% 5.01% -2.8%
5-1 ARM 4.65% 4.73% -1.7%

On Monday, rates for 30-year fixed purchase mortgages dropped further, with the average rate on Zillow Mortgage Marketplace at 5.34%.

Thirty-year fixed mortgage rates varied by state. Missouri mortgage rates, Virginia mortgage rates and California mortgage rates decreased the most, from 5.61% to 5.48% in Missouri, from 5.57 to 5.45 in Virginia and from 5.57% to 5.45% in California. Illinois mortgage rates and Massachusetts mortgage rates were the highest, each at 5.57%. Georgia mortgage rates were the lowest, at 5.42%.

State Average 30-yr. Average 30-yr.
Fixed Rate Fixed Rate
Week ending 6/29/09 Week ending 6/21/09 % Change
Arizona 5.48% 5.58% -1.8%
California 5.45% 5.57% -2.2%
Colorado 5.45% 5.55% -1.8%
Connecticut 5.47% 5.59% -2.1%
Florida 5.44% 5.50% -1.1%
Georgia 5.42% 5.52% -1.8%
Illinois 5.57% 5.64% -1.2%
Maryland 5.52% 5.61% -1.6%
Massachusetts 5.57% 5.68% -1.9%
Michigan 5.50% 5.57% -1.3%
Missouri 5.48% 5.61% -2.3%
New Jersey 5.49% 5.59% -1.8%
New York 5.54% 5.62% -1.4%
North Carolina 5.50% 5.60% -1.8%
Ohio 5.56% 5.64% -1.4%
Oregon 5.50% 5.58% -1.4%
Pennsylvania 5.47% 5.56% -1.6%
Texas 5.45% 5.55% -1.8%
Virginia 5.45% 5.57% -2.2%
Washington 5.46% 5.53% -1.3%
The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates for conforming loans quoted on Zillow Mortgage Marketplace by mortgage lenders to borrowers who have submitted loan requests. State-level data is gathered for the top 20 states with the highest quote volume on Zillow.

 Inman News

A report released this week by Radar Logic finds signs of stabilization in home values, though cautions that some markets may see a continuing slide based on a buildup of foreclosure-related inventory and a typical seasonal slowdown in sales activity.

According to the company’s RPX Index, which measures trends in the price per square foot of homes in 25 U.S. metro areas, the freefall in house prices that was evident in 2008 has held roughly flat for the past several months — but the slowdown in the prices may represent just a step toward recovery.

The company reported a month-over-month price hike in nine U.S. metro areas in February, compared to monthly price increases in six MSAs in February 2008.

Radar Logic cited sales data from the National Association of Realtors trade group and from another monthly price index, the Standard and Poor’s/Case-Shiller price index for 20 U.S. metro areas, as evidence for market improvements — while noting that the operators of the Case-Shiller index do not believe a deceleration in downward price trends constitutes evidence for a recovery.

There will continue to be downward pressure on prices, Radar Logic states in the report.

The volume of motivated sales — defined as the sales of homes at foreclosure auctions and sales of foreclosed homes by financial institutions — has increased by 532 percent across the 25 MSAs tracked in the RPX Index since the beginning of 2006, while the other sales have declined by nearly 71 percent — for an overall sales decline of 58 percent.

The report states that motivated sales have jumped from 2 percent of all sales for the 25 tracked metro areas in 2006 to 38 percent in January 2009.

“Although prices in other sales have not corrected as much as prices in motivated sales, they have been moving downward, and in many (metro areas) other prices are starting to converge with motivated prices,” according to the report.

In some California metro areas, the price of “motivated” properties “appear to have become (or are in the process of becoming) the market price,” the report also states, though that “could actually be good news,” as it could suggest a return to normal value trends.

The report also warns that there have been reports of an “imminent surge in foreclosure filings” that could raise the inventory of foreclosed homes, and that — coupled with typical seasonal slowdowns in sales — could put more downward pressure on pricing.

And by spring 2010 the data should present “a clear picture of which way the market is moving,” Radar Logic reported.

The first Santa Fe/Dallas American Eagle flights began on Thursday, June 11.  Mayor Coss and Governor Richardson were on hand to celebrate the event.

And the Governor made a surprise announcement: American Eagle service between Santa Fe and Los Angeles starts November 19th!

All great news for Santa Fe businesses and tourism.

Sen. Johnny Isakson — the Georgia Republican whose previous attempt to boost the first-time homebuyer tax credit to $15,000 was shot down in the House — hasn’t given up on the idea.

Isakson, the former president of Northside Realty, has introduced a bill that would not only raise the tax credit’s current $8,000 cap but make it available on any purchase of a primary residence — not just to first-time homebuyers. The bill, S.1230, would also eliminate the current income ceilings of $75,000 for individuals and $150,000 for couples.

In a press release, Isakson claimed bipartisan support for the bill. Although Sen. Chris Dodd, D-Conn., was the only Democrat named among the nine co-sponsors, Dodd carries considerable weight as chairman of the Senate Banking Committee.

The Senate got behind a previous Isakson amendment that would have expanded the tax credit as part of the economic stimulus bill passed in February. But the amendment was stripped from the bill before it was approved by the House.

As originally enacted by Congress in 2008, the tax credit was equal to 10 percent of the purchase price of a primary residence, maxing out at $7,500. Last year, the credit functioned more like an interest-free loan, since it had to be repaid over a 15-year period.

Although the Isakson amendment was stripped from the bill, The American Recovery and Reinvestment Act of 2009 did raise the cap from $7,500 to $8,000 for homes purchased before Dec. 1 of this year, and eliminated the repayment requirement unless a home is resold within three years.

A preliminary review of tax returns suggests as many as 1.4 million homebuyers claimed the first-time homebuyer tax credit on their 2008 tax returns, putting it in on track to reach a target of helping 2 million borrowers by the time the tax credit expires on Nov. 30 (see story).

In addition to expanding the tax credit, Isakson’s bill would extend its availability for one year from the date of enactment, and allow homebuyers to claim it on their 2009 tax return for purchases made next year.

The tax credit has made a difference, Isakson said. But allowing all buyers of primary residences to claim it — not just first-time homebuyers — would help existing homeowners trade up, he said.

“First-time homebuyers used it and the market stabilized, but we don’t have a recession in first-time homebuyers. We have a recession in the move-up market,” Isakson said in a statement.

Expanding the tax credit is one of five recommendations put forward by a Housing Working Group made up of members of The Business Roundtable, an association of chief executive officers of large U.S. companies.

The Housing Working Group, chaired by Richard A. Smith, president and chief executive officer of Realogy Corp., is also urging the government to take additional steps to keep mortgage rates “at historically low levels for at least one year” and to make permanent increases in the conforming-loan limit in high-cost housing markets.

The National Association of Realtors said it backs the working group’s recommendations.

“NAR has called on Congress and the Obama administration to expand the first-time homebuyer tax credit to all homebuyers, regardless of income,” NAR said in a statement. “In addition, it is imperative to maintain mortgage interest rates below 5 percent, make the loan limit increases permanent, and strengthen foreclosure mitigation and loan modification efforts.”

The Federal Housing Administration last month issued guidelines for applying the tax credit toward the down payment and closing costs on the purchase of a home with an FHA-backed mortgage. The tax credit can’t be used to meet the FHA’s 3.5 percent minimum down-payment requirement, except by borrowers tapping down-payment assistance loans offered by some state housing finance agencies (see story).

The IRS has published a Q-and-A on the tax credit and the document used to claim it, Form 5405, on a dedicated landing page.

The tax credit has made a difference, Isakson said. But allowing all buyers of primary residences to claim it — not just first-time homebuyers — would help existing homeowners trade up, he said.

“First-time homebuyers used it and the market stabilized, but we don’t have a recession in first-time homebuyers. We have a recession in the move-up market,” Isakson said in a statement.

Expanding the tax credit is one of five recommendations put forward by a Housing Working Group made up of members of The Business Roundtable, an association of chief executive officers of large U.S. companies.

The Housing Working Group, chaired by Richard A. Smith, president and chief executive officer of Realogy Corp., is also urging the government to take additional steps to keep mortgage rates “at historically low levels for at least one year” and to make permanent increases in the conforming-loan limit in high-cost housing markets.

The National Association of Realtors said it backs the working group’s recommendations.

“NAR has called on Congress and the Obama administration to expand the first-time homebuyer tax credit to all homebuyers, regardless of income,” NAR said in a statement. “In addition, it is imperative to maintain mortgage interest rates below 5 percent, make the loan limit increases permanent, and strengthen foreclosure mitigation and loan modification efforts.”

The Federal Housing Administration last month issued guidelines for applying the tax credit toward the down payment and closing costs on the purchase of a home with an FHA-backed mortgage. The tax credit can’t be used to meet the FHA’s 3.5 percent minimum down-payment requirement, except by borrowers tapping down-payment assistance loans offered by some state housing finance agencies (see story).

The IRS has published a Q-and-A on the tax credit and the document used to claim it, Form 5405, on a dedicated landing page.

U.S. News and World Report

Home prices in these 10 cities will appreciate handsomely over the next decade

With home prices at the national level down a painful 32 percent from their 2006 peaks, it’s easy to overlook real estate’s benefits as a long-term investment. But the truth is, despite the ongoing housing bust, the overwhelming majority of America’s real estate markets will appreciate over the next 10 years-although some more handsomely than others. “In the long run-subtracting from the ups and downs of the business cycle-house prices should grow at the rate of household income,” says Mark Zandi, chief economist at Moody’s Economy.com. “If people’s incomes are rising, then they will buy more housing and house prices will rise.” Income growth, in turn, is linked to the strength of the area’s economy. Moody’s Economy.com sifted through employment and population data and analyzed geographic and industry trends to generate 10-year home price projections for each of the nation’s 384 distinct metropolitan statistical areas-everywhere from Abilene, Texas, to Yuma, Ariz. Using these data, U.S. News compiled a list of the top 10 housing markets for the next 10 years.

PICKED TO UPTICK

A list of cities and projected annual percent change in home prices from the fourth quarter of 2008 to the fourth quarter of 2018:

1. Bremerton-Silverdale, Wash.: 5.22 percent

2. Glens Falls, N.Y.: 4.71 percent

3. Fort Collins/Loveland, Co.: 4.06 percent

4. Corvallis, Ore.: 3.95 percent

5, Anchorage, Alaska: 3.8 percent

6. Duluth, Minn.: 3.74 percent

7. Sandusky, Ohio: 3.66 percent

8. Santa Fe: 3.57 percent

9. Pittsfield, Mass.: 3.51 percent

10. Decatur, Ill.: 3.44 percent.

The panic in the Manhattan real estate market of the winter of 2009 lifted in the last few weeks, brokers say, as more and more buyers and sellers have found the courage and the comfort level to sign on the dotted line. A bidding war has even occasionally broken out, though at prices far below those of a year ago, and often considerably below asking price.”When we were in free fall, nobody was willing to pull the trigger,” said John B. Gomes, a broker at Core Group Marketing. “Sellers are more realistic and buyers are optimistic, and we have the lowest interest rates in a generation.”

There is considerable room for skepticism, since the number of closed sales filed with the city remains near the lowest level in many years. Prices are still down as much as 30 percent and show no signs of rising, low-ball offers remain common and some of these latest deals may never come to fruition. But brokers say the climate has definitely changed, producing sales at all price points, as some buyers, tired of looking and waiting, are seizing the moment. Suddenly, brokers say, it is exciting to be in real estate again.

Deals picked up first among studios and one-bedrooms, which benefited from a combination of lower prices, reduced interest rates and incentives for first-time buyers. Then apartments selling under $3 million began to stir. Finally, in the last few weeks, a number of significant deals have been done in the somnolent market for trophy apartments listed above $10 million, brokers say. Sales of many expensive new Manhattan condominiums remain sluggish, however.

At Brown Harris Stevens, a real estate brokerage firm, contracts were off 60 percent last fall, after the collapse of Lehman Brothers, and a steep plunge in the stock market brought deal making to a near halt. But Hall F. Willkie, the company’s president, said that as spring – the peak selling season in New York – got under way, contracts picked up sharply. Sales, off 30 percent in April from a year earlier, were off less than 10 percent in May compared with the same month in 2008.

“We are busy, very busy and the tempo is intense, and that is all great,” Mr. Willkie said.

At Halstead Property, Diane Ramirez, the company’s president, said that contract signings in May had surpassed the number of deals reached the year before. She said many of the sales were to first-timers, and to buyers who had long been priced out of the Manhattan market but were now seeing an opportunity to get in. Some buyers who have lost out on previous deals are showing up at open houses and making offers on the spot, she said.

Bill Kowalczuk, a broker with the Corcoran Group, says that what has changed is that buyers are “willing to step up to the plate” and when they do, “sellers are listening.”

Mr. Kowalczuk has been trying for 17 months to sell a four-story town house, in need of considerable work, on West 21st Street in Chelsea near Ninth Avenue. By January he had cut the asking price by more than 25 percent to just under $4.8 million. A few weeks ago, he said, three buyers made serious offers.

A deal was almost immediately struck with one couple. But after a bank reneged on a previously approved mortgage, they backed out. Mr. Kowalczuk quickly went to contract with a second buyer, who was planning to finance the purchase by taking out a home equity loan on property in London. The final price was below $4 million.

The rise in activity does not mean that the local real estate recession is over. Prices remain sharply lower than they were a year ago, by about 30 percent, and are likely to continue to drift downward over many months, or even years, until the local economy, heavily dependent on Wall Street profits, picks up.

There is also some debate about whether the bump up in activity, which many brokers say has kept them busy showing apartments seven days a week, represents a predictable seasonal uptick, or a shift in market psychology.

Actual closings filed with the city’s Department of Finance are sparse, but these often lag behind the market, because closings can occur months after a deal is struck, especially when co-op or condominium boards have a right to review contracts.

As of the end of May, the overall number of apartments closing in the second quarter was off 55 percent from the same period a year earlier, though up slightly from the first quarter. Co-op closings rose significantly from the first quarter, while condo closings fell as the backlog of contracts signed in new buildings many months ago began to shrink.

Both average and median apartment prices are off roughly 15 percent so far in the second quarter, compared with same period a year ago, with the median at $812,000, the lowest level in more than two years, according to a tabulation of city property filings.

Jonathan Miller, an appraiser at Miller Samuel who prepares market reports for Prudential Douglas Elliman, confirmed that inventory levels began to fall this spring as sales picked up. But he questioned how significant the trend would turn out to be.

“You did see an upturn in activity this time of year,” he said, but “it was not a robust spring.” Mr. Miller said that the spring did not “undo the damage that occurred last fall” during the banking crisis, and that prices still appeared to be slipping, though at a slower pace than earlier in the year.

Mr. Miller says he is particularly worried about new developments that have not cut prices as much as many individual sellers have. Mortgages can be difficult to come by in these buildings, making it harder for buyers to complete deals.

Kirk Henckels, a Stribling broker who prepares a report on the luxury market, doesn’t foresee a rise in prices anytime soon. He said he thought they might fall a bit further; he also feels that prices are in the process of stabilizing amid a burst of deal making.

Last July, Mr. Henckels listed an 18-foot-wide town house at 136 East 80th Street near Lexington Avenue for nearly $12 million. By February the price of the town house, owned by Thomas Flexner, a former vice chairman of Bear Stearns, had been cut by 25 percent, to $8.95 million. After languishing over a slow winter, it went into contract at the end of May.

Mr. Henckels said that over the winter, buyers felt they were in a “deflationary market” and had no reason to buy, since prices would most likely keep falling. With prices now off 30 percent, buyers feel the damage has been done and are tired of looking, he said.

“It’s rather remarkable,” he said. “I did five to six deals in the last two weeks at all price ranges.”

John Burger, a broker with Brown Harris Stevens who just sold a $12 million apartment at One Beacon Court on 58th Street near Third Avenue, attributes the market uptick to the rebound in the stock market since March.

“The stock market has always been a barometer for the health of the Manhattan real estate market,” he said. “Buyers are encouraged by the rebound on Wall Street. It has given people a sense of security to stop and make deals.”

Many of these trends can be seen in the battle over a one-bedroom apartment on the second floor of the Grand Madison at 225 Fifth Avenue and 27th Street. A former showroom building for the gift industry, it was converted to condominiums a few years ago.

The apartment has 11-foot ceilings, a stylish kitchen and a home office, and at 1,200 square feet, is unusually large for a one-bedroom. But it has limited views, facing the Museum of Sex rather than Madison Square Park. Two years ago, in a rising market, an investor paid $1.35 million for it, $1.2 million of which was borrowed money.

When the rental market soured, the seller came under pressure to pay the mortgage, and Jaylin Ramer, a broker at Bond New York, listed the unit in March for $1.15 million, 15 percent below the original purchase price.

Along came Luke Sager, a recent Harvard graduate and co-captain of the college soccer team, looking for his first apartment in New York. Working with Emily Beare of Core Group Marketing, he methodically studied the market, visiting 50 apartments over three months, she said. Love struck when he saw the apartment at the Grand Madison.

But Ms. Ramer was listing the apartment as a “short-sale opportunity,” and other buyers were interested. An offer of $1 million in March was turned down cold, but as time went by the seller decided to be more flexible. Then, during a single week in May, three separate offers came in: one for $825,000; a second, Mr. Sager’s, for $850,000, half in cash; and a third for $900,000.

Mr. Sager countered with a $925,000 bid, all in cash, and to circumvent any more bargaining, insisted that the contract be signed the same day.

And so it was, but now Mr. Sager is waiting for the seller to complete his negotiations with the bank.

Ms. Ramer said that she and her colleagues had been involved in three bidding wars in the last week and that their negotiated deals were running ahead of those a year ago. She said she was working with several buyers who had been waiting, sometimes for years, for prices to come down.

“A lot of people I know couldn’t afford to live in Manhattan a year ago, not even close,” she said. “The people who were waiting on the sidelines are now out, and they are having great values and they are now buying.”

Dolly Lenz, a broker at Prudential Douglas Elliman, said she had several first-time apartment buyers about to sign contracts. These buyers had not been priced out – they currently live in luxury buildings on the Upper East Side, paying rents of around $8,000 a month. But drawn by the prospect of deals, they are willing to spend up to $8 million or more.

“You don’t think of these people as first-time buyers, when they have an oceanfront house in Quogue,” she said. “But this guy has always rented in New York.”

Phaedra Haywood | The New Mexican

Assessor Domingo Martinez has made tremendous improvements in the Santa Fe County Assessors Office since he took over in 2007, but property valuations in the county continue to be “distorted,” according to state evaluators.

“It is commonly known and observed that a significant percentage of the residential properties in Santa Fe County are undervalued,” according to a state Property Tax Division evaluation released last week.

Martinez agrees with that assessment, but maintains that he is doing is best to remedy that and many other problems he inherited from previous administrations.

“It has been very laboring and difficult to correct decades of erroneous and manipulated data that was never questioned by anyone in the past,” Martinez wrote in the portion of the report that calls for his comments.

Martinez has taken a cleaning-house approach to the office since he was elected. One of the first things the former state auditor set about correcting was the method the state uses to evaluate the 33 county assessors in New Mexico.

Santa Fe County’s inconsistent values could have been remedied earlier, Martinez said, if state evaluators had checked the data provided to them by his predecessor Benito Martinez (no relation), instead of taking the former assessor’s answers to important questions about the functioning of the office at face value.

“We really took that to heart,” said Deputy Property Tax Division Director Michael O’Melia. The Property Tax Division has since made its evaluation — which formerly took the form of a questionnaire filled out by the assessor whose office was being evaluated — more stringent.

What used to take half a day, New Mexico Taxation and Revenue Secretary Rick Homans said, now takes three days. And state inspectors pull and audit samples of property records. “He did play a serious role in revising the evaluation process,” Homans said.

Part of Martinez’s reformation program also has been raising valuations on thousands of properties which had previously been under or unappraised. That has not made him popular with county officials, who are concerned about constituent complaints and the costs associated with the approximately 1,100 valuation protests filed by county taxpayers last year. For comparison, residents filed about 490 protests in 2004.

Of those 1,100 appeals, Martinez estimates the county won about half the cases. About 70 protesters decided to forgo hearings before the state Protest Board and take their cases directly to District Court. All of those cases are still pending, and the Assessor’s Office recently asked the County Commission for about $50,000 for related legal fees.

But Martinez continues to maintain that he is doing what he was elected to do: Spread the tax burden fairly among all the county’s property owners.

Data from the state on sales ratios — a statistical measure of how equitably properties are being taxed — backs this up.

For example, Martinez’s office scored a 100.76 in the Price Related Differential category — the statistic is used for measuring tax burdens between high- and low-value properties and shows the office is looking at all types of property equally. The recommended range for that score is between .98 and 1.03.

When County Commissioner Harry Montoya mentioned during a commission meeting last month that he’d had calls from constituents in his district complaining that their values had increased even in the softening real-estate market, Martinez came upstairs from his office and took the podium to address the issue.

“In your district, the property values had not gone up in 14 years,” Martinez told Montoya. Martinez told The New Mexican he didn’t know why that particular part of the county hadn’t been assessed in so long.

Martinez also said overall property values in Santa Fe County have defied the national trend and remained fairly stable.

“The vast majority of properties have not gone down in Santa Fe,” Martinez said. “Some have, and we have those pockets identified; and some valuations have come down. But the majority have gone up or stayed the same.”

The value of taxable property in the county has increased from about $4.2 billion in 2004 to $6.4 billion in 2008.

State-mandated limits on the percentage a property can increase in value each year also skew the public’s perception of what is fair, Martinez said. Because those caps have kept values artificially low, the assessor said, most properties are so far below market value that market fluctuations don’t affect them.

Those caps — which prevent nonvacant residential property from increasing more than 3 percent each year — mean properties that were overlooked in previous assessments will always be valued far below market — unless the law is changed or the property transfers.

O’Melia said changes in state checks designed to measure the effect of the caps are being put in place.

Commissioner Liz Stefanics said she thinks the public needs more information about the factors that affect property values.

“We need to let them know that we are not raising their taxes arbitrarily,” Stefanics said. “We are following the law.”

Martinez said a plan is in the works to provide meetings and literature to help educate residents on how property taxes work.

In the meantime, Martinez said, he is continuing to try to reform the office.

The implementation of a new, computer-aided mass-appraisal system — which required the digitization of about 86,000 paper property cards — is nearly complete. And Martinez recently convinced the county commission to fund five new positions in his department.

Martinez said he plans to begin wholesale reappraisal of the county beginning in 2011, sending his appraisers to physically inspect every property in the county.

Martinez said he thinks he can clean up Santa Fe County’s tax rolls in three or four years. But in order to do that, he’ll need to get re-elected.

But Martinez said his approach to bringing county property values to current and correct — something he has not been able to accomplish yet — has not made him popular with some taxpayers.

“We paid the price for it,” he said. “We had people coming unglued on us. We had a little old lady come in here and tell me ‘I want this lowered.’ I said ‘It’s against the law I can’t do it.’ She said ‘When do you run?’ I said 2010. She said ‘I’m going to remember you, and I have a big family.’ ”

Still, Martinez said, he feels he has a good chance at getting elected again.

“I think the majority of people believe we are doing a good job,” he said. “They are tired of seeing certain individuals get away with it and they don’t want any special circumstances for them — they just want the special circumstances down the road of paying what they should, based on their value.”

Though Martinez has another year left in his term, at least one person already is eyeing his job.

Former County Commissioner Paul Duran — who has toyed with the idea of campaigning for several elected offices since being termed out of the commission in 2004 — said Thursday he plans to seek the position when election time comes around. The job pays $65,000 to $68,500 per year, depending on the qualifications of the candidate.

“I’d like to take a stab at it,” the real-estate agent said. “I think it would be interesting. It would be fun, and I think I have a lot to contribute, living here all my life and being in the real-estate industry for 30-plus years. I think I have a pretty good handle on property.”

WHAT PROPERTY OWNERS MUST KNOW

Property owners in Santa Fe County who are not paying taxes on new homes, buildings or improvements have until the end of the year to report the oversight without facing possible prosecution.

Assessor Domingo Martinez said taxpayers are legally responsible for reporting new buildings or improvements so they can be considered in valuation of effected parcels.

Those who self render (as state law requires) before Jan. 1, 2010, could still face possible penalties, he said. But those who don’t and are later discovered during a countywide sweep Martinez plans to conduct in 2011 will have their names turned over to the District Attorney for possible prosecution.

State statute allows for fines up to $5,000 and prison time of up to 18 months for failure to report property-tax liability.

For more information, call the Santa Fe County Assessor at 986-6300.