Condo rule change would legalize many homes

Julie Ann Grimm: The New Mexican

A state law that goes into effect next month will halt the creation of new condominiums that don’t comply with the city zoning rules.

But most of the condos that skirted zoning rules in the city of Santa Fe during the last couple of decades won’t be negatively affected by the law change. If anything, insiders say, the law and a proposed change to the city code will clear up potential problems for small-time property owners who previously faced a legal quagmire.

About one-fifth of the city’s condominium associations contain dwelling units that exceed density limits for the lot size under city rules, according to a recent staff estimate. Of the roughly 4,309 condominium units that belong to 378 condominium associations in Santa Fe, officials say about 324 units exceed the maximum allowed density for the lot they were built on.

Prior to this year’s session of the state Legislature, buildings and lots could be subdivided as condominiums and recorded with the county clerk absent any city review. State Sen. Peter Wirth, D-Santa Fe, succeeded after several tries to get legislators and the governor to amend state law so that cities can opt to require such a review.

City officials are taking steps to codify the change here. A proposal to amend the city Land Use code was approved Monday by the Public Works Committee and is on the agenda for the Finance Committee next Monday. A final vote and public hearing at the City Council meeting is scheduled for May 30, after which it would take effect immediately.

The practical result of the city adopting such an ordinance change would be two-fold, city Land Use Director Matt O’Reilly said.

“This ordinance, in a nutshell, is a way of addressing, within reason, the condominiums that exist illegally,” he said, “and permanently stopping forever this from happening in the future.”

Of the estimated 324 units that are illegal today, the city ordinance will effectively “grandfather in” about 80 to 90 percent. O’Reilly said that term actually isn’t an accurate description of what would happen. The right term, he says, is that those units will become legal structures that don’t conform to city zoning rules.

A small group of illegal condos would not be legalized, however. They include condominium units that were built without a building permit, and those that are still owned by the person who originally created the illegal condominium. Lots where owners have development rights but have already put up too many dwelling units under zoning rules also won’t become legal under the proposed changes.

Most of the affected properties are on the north and east side of the city, and half of them were originally intended to be guest houses, he said. In those older parts of the city, O’Reilly said, there are many legally nonconforming structures already, owing largely to the fact that much of that region was developed before zoning laws were enacted in the 1960s.

Condominiums that would become legal nonconforming structures when the city approves the law change don’t require any additional paperwork to get that status, but O’Reilly said owners who wonder about the status of their condominium should contact the land-use department.

“If you have reason to believe that yours was built without a permit, you might want to come see us,” he said.

Permits ensure that electrical and plumbing systems are safe, among other details.

Another consequence of making the illegal condos legal is that owners who had previously run into hurdles in refinancing, sales and efforts at renovation will now be able to accomplish all of those tasks.

Jennifer Jenkins, a development consultant in Santa Fe, said she had mixed feelings when she first learned about pending changes to the state law and the city code, but she believes the city is moving in the right direction.

“We have to comply with zoning. We do. It is normal. And for somebody to purposely create a project that is a nonconformity, they are just creating problems,” she said. “They are creating problems for themselves. They are creating marketing problems. They are creating future legal issues. It is in nobody’s interest to intentionally do that.”

Jenkins said she is pleased that the city plans to add what she called “the grandfathering language” as a consumer protection.

Wirth, an attorney, said he backed the state law change because the system was causing situations that were nearly impossible to navigate.

“We call this a legal quagmire,” he said, “because you’ve got, oftentimes, an innocent purchaser who bought one of these things, with the title insurance, who then finds out that it was illegally zoned and that they have a piece of property that is not worth a whole bunch.”

 Link to Original Article

Contact Ryan Bolton and Matt Desmond

New Mexico has two of the top retirement spots in the US- Santa Fe and Las Cruces. Perhaps this is helping to stabilize our Real Estate Market.

 Boomers are willing to move farther than previous generations when they retire, and they are choosing places unlike stereotypical retirement hotspots, says Tom Brokaw in his report on Boomer retirement, airing on CNBC, Thursday, March 4 at 9 p.m. ET

The top places listed by AARP and explored on the show are:

1. Loveland/Fort Collins, Colo.
2. Las Cruces, N.M
3. Rehoboth Beach, Del.
4. Portland, Ore.
5. Greenville, S.C.
6. Sarasota, Fla.
7. Ann Arbor, Mich.
8. Tucson, Ariz.
9. Montpelier, Vt.
10. Honolulu
11. Santa Fe, N.M
12. Atlanta
13. Charleston, S.C
14. Northampton, Mass.
15. San Diego, Calif.

Source: CNBC, Paul Toscano (02/05/2010)

Foreclosures hit hard but less so in N.M.
By | The Associated Press

2/11/2010

The number of U.S. households facing foreclosure in January increased 15 percent from the same month last year, and a surge in cash-strapped homeowners who’ve fallen behind on mortgages could be on the way.

More than 315,000 households received a foreclosure-related notice in January, RealtyTrac Inc. reported Thursday. That number is down nearly 10 percent from 349,000 in December, which saw the third highest total since the company began tracking foreclosure data in 2005.

There were 107 foreclosures in Santa Fe County in January, according to RealtyTrac, most of them (33) in the 87507 Zip Code. That was followed by the 87505 Zip Code, where there were 22.

Santa Fe’s foreclosure rates for January 2009 were not included in RealtyTrac’s report, precluding a comparison with 2010′s rates. RealtyTrac’s data specialist could not be reached.

In New Mexico there were 1,281 new foreclosure filings and nine foreclosure sales, according to RealtyTrac. The average sales price of foreclosed homes in January was $208,841.

The rate of foreclosures in New Mexico remains low. In his most recent newsletter, Santa Fe title company executive Alan Ball said foreclosures in states such as California and Florida exceeded 400,000 last year.

In New Mexico, by contrast, there were just over 7,000 foreclosures.

Ball also said that Santa Fe real estate sales in January were up 58 percent from the same month last year.

“We have already thanked the first-time homebuyer tax credit law and can certainly do so again” for the increase in home sales, Ball said. “Does that account for the increase? That is difficult to say.”

In January, one in 409 homes across the country were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions. Banks repossessed more than 87,000 homes last month, down 5 percent from December but still up 31 percent from January 2009.

January marked the 11th straight month with more than 300,000 properties receiving a foreclosure filing. The numbers could stay above that level as unemployed homeowners who have tried to keep up with their mortgages finally start missing monthly payments.

Mortgage financier Fannie Mae reported in late January that the rate of borrowers who have a conventional loan on a house and are seriously delinquent was 5.29 percent in November, more than doubling the rate of 2.13 percent in November 2008. Borrowers are considered seriously delinquent if they are past due by three months or more, or are in foreclosure.

“There’s a lot of foreclosures in the pipeline, and the number is going to continue to get bigger,” said Patrick Newport, an economist with IHS Global Insight.

Last month’s foreclosure activity followed a pattern similar to that of a year ago, when a double-digit percentage increase in December was followed by a 10 percent drop in January.

The dip in January’s numbers may be due to processing delays by lenders during the end-of-year holidays, said Rick Sharga, senior vice president of RealtyTrac, which is based in Irvine, Calif.

“I don’t think it’s an early sign of the coming of the end of the foreclosure crisis,” Sharga said.

A record 2.8 million households were threatened with foreclosure last year, and the numbers are expected to rise to between 3 and 3.5 million homes this year, RealtyTrac said.

Slowing the foreclosure rate is a key step in the recovery of the real estate market and the overall economy. The foreclosure crisis forced the federal government and several states to come up with plans to prevent or delay the process to help delinquent borrowers.

Foreclosed homes are usually sold at steep discounts, so they often lower the value of surrounding properties. Cities lose property tax dollars from foreclosure homes that sit empty and from declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Initially, subprime mortgages were mostly the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

Among states, Nevada posted the nation’s highest foreclosure rate, followed by Arizona, California, Florida and Utah. Rounding out the top 10 were Idaho, Michigan, Illinois, Oregon and Georgia.

The metro area with the highest foreclosure rate in January was Las Vegas, with one in every 82 homes receiving a foreclosure filing. It was followed by Phoenix and the California cities of Modesto, Stockton, and Riverside-San Bernardino-Ontario.

The New Mexican contributed to this story.

Here is a link to the Original Story

Real estate loans strike at banks’ bottom lineLos Alamos National Bank chief sees values stabilizing, buyers emerging
Bob Quick | The New Mexican
Posted: Tuesday, February 02, 2010          

Los Alamos National Bank, the largest bank in Northern New Mexico, may have suffered setbacks in the real estate market, but bank chief executive officer William C. “Bill” Enloe is confident things maybe looking up.

“Our income (in 2009) was down, which was due to larger than normal transfers for bad debts,” he said. “We’re experiencing everything every other bank is, which is more loans with problems. That affects our income.”

Los Alamos Bank has $1.87 billion in assets. That compares with $719 million for First National Bank of Santa Fe and $499 million for Century Bank.

LANB’s most recent call (quarterly) report indicates LANB’s income for the year was only $10.8 million after the bank wrote off $24 million in nonperforming loans.

“We felt very fortunate that we had income,” Enloe said. “Our peer group average was a loss of 0.4 percent. We were certainly below expectations, which was disappointing, but it was encouraging we have been able to address the issue.”

Enloe doesn’t think the bank’s expansion, the newest branch is on Cerrillos Road in Santa Fe, is bad for the bottom line. He said the three branches now form a triangle that covers all of Santa Fe “pretty well.”

In a news release, Enloe said although values have begun to stabilize and buyers to emerge, “we remain concerned about how general economic conditions in the nation and in New Mexico have affected and potentially could affect our customers and markets, and we have taken measures to properly manage these risks.”

Those measures included doubling the bank’s provision for loan losses and bringing in a federal regulator, the Office of the Comptroller of the Currency, to work with the bank on its problem loans.

In a FDIC report, the bank’s ratio of equity capital to assets was 9.61 percent. Banks like to keep that number at 10 percent.

The call report indicated LANB added $30.4 million in loans on nonaccrual status during the past quarter.

Enloe sees that trend slowing down. “It peaked around August of last year,” he said. “Since then our substandard loans have decreased 20 percent, but it is still at a much higher level than we consider normal.”

The problem loans are primarily residential real estate loans on properties in Albuquerque and Santa Fe, Enloe said.

Despite the tough times, the bank has maintained a staffing level of 316 people, Enloe said.

Enloe added that the bank’s pre-reserve earnings were “very strong” and that the bank has “a lot of equity.”

As of Dec. 31, 2008, LANB had equity capital of $121 million, the call report indicates. That amount came to $153.1 million by Dec. 31, 2009, an amount bolstered by an injection from LANB’s holding company, Trinity Capital Corp., of $35 million.

Trinity Capital also received $35.5 million in funds from the federal Troubled Asset Relief program, Enloe said, adding that the bank is in no rush to pay the money back.

“We don’t have the incentive the large banks do to return the money,” he said.

LANB has a rating of 3.5 stars, or “good,” by Bauer Financial Ratings, a bank analyst. Bauer’s highest ranking, five stars, is “superior.”

Trinity Capital has about 3,000 shareholders, 8.5 percent of them members of an employee stock ownership program.

On Monday, Los Alamos National Bank announced that it had entered into an agreement with the Office of the Comptroller of the Currency, its primary regulator, “to further solidify our financial soundness against the uncertain consequences of a deep recession,” a statement said.

The agreement came after an on-site examination of the bank by the OCC and is intended to reduce the bank’s classified loans and reduce its loan concentration in commercial real estate.

“The bank has made measurable progress in addressing the requirements to date, including an approximate 18 percent decrease in classified loans since June 30, 2009,” the statement said. “The bank already has programs in place addressing most of the provisions of the agreement.”

According to the statement, LANB still enjoys a “well-capitalized status” and remains “strongly capitalized,” with more than $252 million in liquid funds. The bank also has an additional $8.5 million in reserves for loan losses not included in capital.

Another bank with a large presence in Santa Fe, First State Bancorporation, parent company of First Community Bank, has reported a loss of $28.4 million in the fourth quarter of 2009. For the year, First State reported a net loss of $110.5 million.

“The net loss for the quarter and year ended Dec. 31, 2009, resulted primarily from the significant provision for loan losses due to the level of non-performing assets and charge-offs and write downs of other real estate owned,” said H. Patrick Dee, president and chief executive officer of First State, in a statement.

The pain may not be over yet.

“While overall classified loans remained stable for the second straight quarter,” he added, “we experienced another increase in non-performing loans,” Dee added.

Here is a link to the original article.

When you are ready to Buy or Sell, contact us.

Click here for the origianl Press release.

Charter Bank, Albuquerque, New Mexico, Assumes All of the Deposits of Charter Bank, Santa Fe, New Mexico

FOR IMMEDIATE RELEASE
January 22, 2010  Media Contact:
Greg Hernandez (202) 898-6984
Cell: (202) 340-4922
Email: ghernandez@fdic.gov 

Charter Bank, Santa Fe, New Mexico, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Charter Bank, Albuquerque, New Mexico, a newly-chartered federal savings bank and a subsidiary of Beal Financial Corporation, Plano, Texas, to assume all of the deposits of Charter Bank.

The eight branches of Charter Bank will reopen on Monday as branches of Charter Bank. Depositors of Charter Bank will automatically become depositors of Charter Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

This evening and over the weekend, depositors of Charter Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of September 30, 2009, Charter Bank had approximately $1.2 billion in total assets and $851.5 million in total deposits. Charter Bank did not pay the FDIC a premium for the deposits of Charter Bank. In addition to assuming all of the deposits of the failed bank, Charter Bank agreed to purchase essentially all of the assets.

The FDIC and Charter Bank entered into a loss-share transaction on $805.5 million of Charter Bank’s assets. Charter Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-800-323-6111. The phone number will be operational this evening until 9:00 p.m., Mountain Standard Time (MST); on Saturday from 9:00 a.m. to 6:00 p.m., MST; on Sunday from noon to 6:00 p.m., MST; and thereafter from 8:00 a.m. to 8:00 p.m., MST. Interested parties also can visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/charter-nm.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $201.9 million. Charter Bank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. Charter Bank is the seventh FDIC-insured institution to fail in the nation this year, and the first in New Mexico. The last FDIC-insured institution closed in the state was Zia New Mexico Bank, Tucumcari, on April 23, 1999.

Contact Us

This article was just posted on the New mexican website. Though none of us have a crystal ball, the statistics certainly give us some good insight.  We can say with certainity that Sales are picking up, and prices have gone down. For more details please contact us

Santa Fe real-estate market may stabilize as 4th quarter prices declined

Bruce Krasnow | The New Mexican
 The best news Santa Fe Realtors have about 2009 is that it’s over.

The 4th quarter median price for homes sold in the city and county declined 9 percent to $335,000. But, buoyed by a federal tax credit, the number of homes sold increased from a year ago by 16 percent to 274 in October, November and December. Still, the sales were less than half what they were in 2005, the peak sales year of the past decade.

In addition, the number of housing starts in the city of Santa Fe hit a 40 year low with 180 permits in 2009. Reed Liming, a planner with the city, said one has to go back to 1969 before new home construction starts were at that level.

Finally, the number of agents who renewed their membership to the Santa Fe Association of Realtors declined 15 percent to 795 as of this month, said Lois Sury, the new association president, and the group has trimmed its budget to adjust.

Sury said the nation has gone through a historic economic downturn, “One I’d rather read about in history books than live through again. ” The housing market in Santa Fe has adjusted, she said at the quarterly breakfast meeting Wednesday where the statistics were released.’

She said the final sales price of a home was at 93 percent of the listing at the end of 2009, up from 80 percent a year ago — and that shows sellers have adjusted their expectations.

“Affordability continues to improve, with more sales at the lower end of the market affecting the overall median price of homes,” she said.

Jane Trusty, an appraiser at the breakfast, called the first half of 2009 difficult, and with sluggish sales it was often hard to find comparable homes for valuation.

“We’re breathing quite a sigh of relief,” she said. “What we found in the last two quarters is that things have stabilized quite a bit,” Trusty said.

The first half of 2009 saw stability in median sales prices — but agents say many homes were not being sold because sellers were not prepared for lower offers.

That was not the case in the third quarter, which saw a 20 percent decline in the median sold price. The just-ended quarter saw the median sold price in the unincorporated area drop 18 percent to $350,000. Prices of sold homes in the city of Santa Fe fell 6 percent to $329,500.

“Prices have reset,” said Sury

Many sales under $500,000 are a result of the federal tax credit that has been expended under the economic stimulus plan. The credit is now open to existing homeowners who want to move up or downsize — but homes must be under contract by April 30 to receive the credit, $8,000 for new buyers and $6,500 for repeat buyers.

And it’s not just for move-up buyers. Sury is seeing long-time homeowners who want to downsize take advantage of the program to purchase something smaller, she said.

“It’s your tax money,” she said. “You might as well use it.”

Gary Miller a mortgage specialist with Century Bank, said there is an upward trend in mortgage interest rates from Wednesday’s average of 5.2 percent on a 30-year fixed rate loan. That means the first three months of 2010 brings a convergence of low prices, low borrowing costs and the tax credit. He tells potential buyers that it won’t last.

“It’s important to take action now,” he said.

Most of Santa Fe’s Realtors will tell you that historically January and February have been the quietest months of the year. However, 2010 has started out well for us. 

I also remember that in 2006 that we started the year off with about 12 million worth of property under contract in January.

With interest rates at historic lows, the homes buyer tax credits, and prices at or near the bottom, we choose to be optimistic about 2010.

Bruce Krasnow | The New Mexican

 When Realtor Lois Sury went to buy her first home in Santa Fe some time ago, there were about five houses in her price range and she was competing against other buyers. That “hyper market,” as she called it, was not good for consumers, who had few choices to consider and a heavy burden to overcome to get into a first home.

Those days are gone in Santa Fe, perhaps for a long time. Market data indicate that the number of residential home sales in 2009 was at the lowest point in decades, in terms of the number of transactions and the price volume of those sales.

The statistics have been compiled by Alan Ball, a title agent who publishes a monthly newsletter on the Santa Fe real estate market. They show that the real estate meltdown is more about the industry and Santa Fe’s economy than the habits or wishes of individual homeowners.

Median prices for instance, have held up considerably well in Santa Fe, starting in 2001 at $296,000 and ending in 2009 at $447,000. That’s a more than 50 percent jump.

But the total dollar amount of residential sales shows that volume peaked at $1.2 billion in 2004-05, then tumbled to $540 million in the year just ended, a decline of 56 percent. The dollar volume of all sales in 2009 was even less than the $578 million generated nine years ago.

“That’s money not circulating in the community,” Ball said. “If you look at local Realtors, lenders, surveyors, appraisers, insurance agents — if you just start piling up all the things that directly relate to the sale of a home — it’s money not changing hands. And that affects anybody that sells goods or services. There’s less discretionary income.”

In terms of charting sales numbers, the last nine years shape a modified bell curve. Total residential sales in 2001 ended at 1,955. They climbed to 2,800 in 2005, but by 2009 had tumbled to 1,200 — significantly less than the number at the start of the decade, Ball said.

But turn over a troubling bell curve, and you get a smiley face. Ball and others see opportunity in that option.

Michael Halsey, an economic consultant and owner of Business Futures, said Santa Fe’s housing market has always been unsustainable, like an upside-down pyramid, and now there is a chance to right the foundation.

Everywhere else, communities build housing from the bottom up, with young or first-time buyers getting into less expensive homes and trading up as needed for more amenities or space. And there should be more less expensive homes being built than luxury properties.

Not so in Santa Fe, Halsey said, where the market for luxuries and second homes had long been driving the construction market. Craftsmen, builders, architects — and the labor they hired — were so busy with new high-end products, there was nothing else being built. The result was a small selection of homes for people living and working in Santa Fe who could not afford million-dollar and up houses.

“The community was supporting an industry that I felt was top-heavy as far as top-end products,” he said. “We are just now starting to fulfill the demand for entry-level housing, that hasn’t been met in past years.”

Halsey cited the more affordable new homes in Rancho Viejo as an example of how the market has adjusted. The houses are being constructed with basic finishes, but leave room for expansion and upgrades as families need them. The cost of new construction, Halsey said, has dropped in Santa Fe about 20 percent.

Sury, president of the Santa Fe Association of Realtors, said the homebuyer tax credit is already helping to expand the pyramid and is bringing out new buyers who, in the future, can trade up as their homes increase in value. A whole new generation of Santa Fe residents have a chance to get on the escalator of home appreciation, she said.

And though it’s been a slow year for sales, Sury said consumers are far more confident now than a year ago, when the stock market crashed and financial institutions were failing.

“At this time last year we were in a much worse situation than we are now. It was much bleaker. Consumers seem to have more confidence now,” she said.

Adding to the confidence is the fact that the federal tax credit for home purchases has been extended until mid-2010 and is also available to repeat buyers who want to move. In Santa Fe there are now plenty of affordable homes all over the city and not just in certain neighborhoods.

“Five years ago, we were seeing multiple offers and homes under contract in two or three days. Buyers had little or no power,” Ball said. “Now we’re seeing more balance on the lower end.”

There needs to be a solid year of sales and price gains before anyone can call an end to the housing recession. But people still want to move to Santa Fe, and many people already here want to move to a different house or change neighborhoods, he added.

“I cannot escape the attraction Santa Fe has for so many people, Ball said. “We’re going to warm up faster than other markets. I don’t know if we’re out of this thing or not, but there are promising signs.”

The National Association of Home Builders has information about the homebuyers tax credit at federalhousingtaxcredit.com.

Originally scheduled to expire Nov. 30, the first-time homebuyer tax credit has been extended until April 2010 and homebuyers will have until July 1 to close as long as the purchase contract is in effect on April 30. A new $6,500 tax credit is now available to existing homeowners wanting to buy.

Eligible homeowners must have used the home being sold as a principal resident consecutively for five of the previous eight years with a price limitation on the new purchase of $800,000. Income limits have also been increased to $225,000 for married homebuyers and $125,000 for individual (single) buyers. Buyers in Santa Fe can take advantage of this opportunity to purchase a larger home for their growing families, other desired home amenities, or simply downsize.

On the home front, Santa Fe home sales are trending up throughout 2010 and October single-family home sales topped over 100 for this first time this year. Condo and townhome sales remained flat in September and October, likely due to the fact that affordability continues to improve for single-family homes. Lower prices may also bring some international buyers wanting to scoop up Santa Fe homes while the value of the dollar is still hitting record lows. This may explain why France was listed as one of the top 10 states/countries searching for homes online here in Santa Fe. With the help of a new service to the Association of Realtors, participating brokerages can track the top 10 states/countries for online visits to Santa Fe area listings. Realtors, Sellers … parlez-vous français?

To help get more Santa Feans in homes, the County of Santa Fe has recently established several pilot programs designed to increase work force housing and help county workers purchase a home. On Nov. 17, the County Commission voted unanimously to earmark $500,000 to support three affordable-housing programs.

The most unique of the three will initiate a developer subsidy of up to $10,000 per unit to defray the cost of infrastructure when building affordable housing. A down-payment assistance program for county employees will be created and the ordinance will permit the county to donate land or buildings for conversion to affordable housing. Administrative policies are being crafted by county staff to support these new affordable housing initiatives.

Donna Reynolds For The New Mexican

Information provided by the
Santa Fe Association of Realtors®, www.sfar.com.

We are the future of Santa Fe Real Estate:

The Commerce Department said new home sales rose 6.2% last month, to a seasonally adjusted annual rate of 430,000, from an upwardly revised rate of 405,000 in September. It was the sixth time new home sales had risen in the past seven months.

The October increase far surpassed industry expectations. A panel of expert forecasts compiled by Briefing.com had predicted new home sales of 404,000.

“The evidence continues to show stabilization in the housing market,” said Mike Larson, a real estate analyst with Weiss Research. “It’s not a huge new bull market, mind you, but an end to the relentless flood of bad news we had [in previous years].

“The conditions are in place that will enable prices to begin stabilizing,” he added.

Check home prices in your city
New houses sold in October for a median price of $212,200, up from $204,800 in September. The average sales price was $261,100.

Larson was especially positive about the reduction in inventory. There were 239,000 new homes on the market at the end of the month, a 6.7 month supply at the current sales rate.

“Construction has been cut to such low levels that the absolute number of homes on the market is at its lowest level since 1971,” said Michelle Meyer, an economist with Barclays Capital. “The supply has been reduced significantly and is calibrated better with demand.”

There has been some rise in demand for those few homes on the market but, compared with recent years, sales are still very modest. At the height of the market in July 2005, new homes sales peaked at an annualized rate of nearly 1.4 million. That puts October’s rate about 70% lower.

The sales report followed a release last week from the National Association of Home Builders revealing that home construction fell to a six-month low during October.

Some of that decline probably stemmed from a reaction by builders to the impending end of the first-time homebuyers tax credit, which had been due to lapse Dec. 1.

The credit has been extended, however, and expanded to include existing owners. That should provide a boost for new home construction again.

Residential construction is a large part of the economy. During the third quarter, the home building and remodeling industry added about a half percentage point to the 2.8% rise in the gross domestic product, according to Meyer.

“Home construction often has a big impact on quarterly growth,” she said.