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.”

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In Defense of Home Ownership
by Ron Lieber; The New York Times

It’s hard to read the headlines and not conclude that becoming a homeowner is a terrible idea.
 
Last week, the National Association of Realtors announced that existing-home sales in July had fallen an astounding 25.5 percent from the previous year. Sure, there was a federal tax credit in place last summer. But with single-family home sales at their lowest level since 1995 and unemployment still stubbornly high, home prices may fall further.

In the meantime, millions of homeowners are still far underwater, and government programs to help them have fallen well short of their goals. More foreclosures are coming, casting a deeper shadow over home prices. So it’s hardly surprising that the conventional wisdom says that home values will never again rise faster than inflation.

But as with stocks and the weather, it is dangerous to assume any certainty in the housing market. And by wallowing too much in the misery of others, people looking for a new place to live run the risk of thinking every home purchase will end in regret, at least financially.

Many still could, if they buy in hard-hit areas where prices could fall further.

But a mortgage is still a form of long-term forced savings, after all. This is more important than ever, since fewer people have access to generous pensions than they did during the last big housing slump. A 401(k) or similar plan is no bargain, either, with its erratic returns and employer matches that come and go as the economic winds shift. Social Security is also likely to be less generous, and Medicare will probably cost more.

Besides, owning a home isn’t just about what shows up on a net worth statement — something that bears repeating after all the “investing” that people thought they were doing when buying homes over the last 10 or 15 years. Many of these more qualitative factors, from living free of a landlord’s whim to having access to a good school district or retirement community, haven’t changed and probably never will.

It is possible, as a homeowner, to make very little money but still buy plenty of happiness. So before you swear off real estate, reconsider a few of the basics.

Worst Cases

Some buyers may rue the day in 2010 they bought their homes. They may end up like those who bought in 2006 and have lost their jobs. Now those people face the difficulty of moving to pursue employment elsewhere because they owe much more than their homes are worth.

Marke Hallowell and Allison Firmat, who are getting married next month, are well aware of the history. Yet they plan to put 5 percent or less down, using a fixed-rate mortgage backed by the Federal Housing Administration, once they find a condominium in southern Orange County, Calif. (They’ve already been outbid a few times.)
Ms. Firmat is not working, and Mr. Hallowell is a Web developer. Does he worry about mobility problems or making the payments in the event of a job loss, given that he’s the sole breadwinner? “We’re getting such a good deal on interest rates that we could rent our place out,” he said.

Mr. Hallowell and Ms. Firmat say they believe their approach is conservative, at least compared to what they might have done five years ago.

“Nothing is going to change the rate we will have,” Mr. Hallowell said. “Condos like the ones we’re looking at now were unobtainable in the past, unless we went into something with a total balloon payment. There were times I was tempted, but never seriously.”

Indeed, many people who are buying at the moment are locking in mortgage rates of about 4.5 percent. A year ago, they might have paid 5.25 percent on a $300,000 loan for a monthly payment of about $1,657. Today, you could lock in a lower monthly payment of around $1,520 on a mortgage that size, or you might not need to borrow that much, given that prices have fallen in many areas.

Forced Savings

You may make nothing at all beyond inflation over time on a home, but the part of your mortgage payment that goes toward principal is a form of forced savings.

Sure, you might do better by renting and investing the difference between the rent and the total costs of ownership. But at least three things need to go right.

First, you need to actually save the money. Americans have trouble with that sort of plan. Then, you need an after-tax return that’s better than whatever a home would deliver. That’s a task that might not have gone so well over the last 10 or 12 years, and it involves its own future risk, given how little safer investments are returning now. Finally, you must not raid the savings along the way.

Difficult Landlords

A bank can kick you out only if you don’t pay your mortgage. But landlords can drive you away in any number of ways.

Laura Mapp and her husband, Carl Berg, rented from a relative, but it didn’t go particularly well. They found another landlord they liked, but came back from a holiday trip one year to a note saying he wanted to move in himself. They had a month to scram. (The note came with a bottle of wine, at least.)

In yet another rental, they let their landlord know they were looking to buy and inquired about a month-to-month lease. No problem, their landlord said, as long as they used his boyfriend as their real estate agent.

Earlier this year, the couple gave up on landlords and bought a house in the Highland Park neighborhood in Seattle.

The Nice Part of Town

No matter how pretty the neighborhood, prices may still fall further in places like greater Detroit, Cleveland and Las Vegas; outlying areas of Los Angeles, San Francisco and Phoenix; and much of Florida.

But if you want to live in the Fox Hill Farm development in Glen Mills, Pa., you’ll have to buy because renters are not allowed, said Bob Kuhn, who lives there. The same may be true of other communities for older people.

And there may not be many family-size rentals — or at least any financial edge to be gained by renting — in suburbs or urban neighborhoods with excellent public schools.

After many years of building their down-payment fund and a couple of years of watching the listings in the Eagle Rock and Mount Washington areas of Los Angeles, Garret and Alison Williams realized that prices simply were not falling much there.

By the time they were ready to pounce this year, they had a big enough down payment and interest rates had fallen so far that renting didn’t make much financial sense, even if they could have found a rental big enough for them and their two small children.

“Had we rented, we would be paying more than we’re paying for a mortgage,” said Ms. Williams, who had lived in the same two-bedroom rental for 12 years before she and her family moved into their new house in Eagle Rock earlier this month. “I don’t see how we could really regret having made the move when it’s so much better for us on so many levels.”

Link To Original Article

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one of those is the Dale Ball trail system. In Santa Fe, unlike the other fitness “meccas”, you can access the trails within five minutes of downtown. The Dale Ball Trails are 17 miles worth of city own and maintained trails in the foothills of the rockies. This trail system also provides access to the Santa Fe National forest, and endless miles of  hiking, biking, running, snowshoeing, etc.

So please, join us in celebrating and personally thanking Dale, for the gift he has given Santa Fe.

The following is an article that was just published in the New Mexican. It outlines sales numbers and prices, and provides good information on where/why the market is moving.

Article:

Santa Fe home sales sputtering back in 2010

By: Bruce Krasnow; The New Mexican

Home sales bounced a bit in the first quarter of 2010, with sale volumes increasing across all sectors of the Santa Fe market, according to several measures.

The Santa Fe Association of Realtors reported Wednesday that the total volume of city-county detached home sales increased 16 percent from a year ago to 205. While the median sales price in the unincorporated area fell, prices of homes sold inside the city were up some 50 percent to $464,000.

The numbers are year-over-year comparisons, and 2009 was the worst year for home sales in at least a decade. The number of sales in the first quarter is still down more than half from its peak in 2006.

But considering Santa Fe’s cold, snowy weather in January, February and March and that overall prices lifted, the statistics show the market has come off the 2009 bottom.

“All segments of the market at moving,” association president Lois Sury said. “It seems to be across the board.”

Like elsewhere in the United States, the federal government’s homebuyer tax credit — up to $8,000 for new buyers and $6,500 for current owners buying again — helped first-quarter sales, though it will be months before anyone knows the number of buyers in each state who have claimed the money.

Homes must be under contract by April 30 to qualify for the tax break — and that sent March sales up 34 percent in Albuquerque and 54 percent in Rio Rancho, according to the New Mexico Business Weekly. In Santa Fe, the quarter was more even, with volume increases all three months.

In Santa Fe, the incentive has helped many empty-nest couples who may have wanted to sell a larger home and move into a smaller house, condo or townhome, said Sury, as sales of those units more than doubled from a year ago.

“I’ve helped families like that,” said Sury. “They want something small here. We’ve seen those buyers come back into the market.”

Alan Ball said the March sales numbers in Santa Fe are “kind of a big deal” because the 2010 number beat both the 2009 and 2008 sales numbers. He also said the high-end market showed momentum for the first time in two years, with 18 sales over $1 million.

Some of it is the homebuyer tax credit, said Ball, who publishes a monthly newsletter on the Santa Fe real estate market, but it’s also a sign the market is righting itself.

“What some people wanted last summer (in asking price) is now even lower,” Ball said. “That’s what buyers are seeing and acting on.”

There were some wide fluctuations in the county’s median prices. Some of that is because the new homes in Rancho Viejo are being targeted to first-time buyers, with some selling for under $200,000, to take advantage of the tax credit.

The other big decline is Las Campanas, where luxury home prices have reset.

Sellers are more realistic, said Kay Sutt, a real estate appraiser. “The closer to balance our market comes, the quicker we’ll recover,” she said.

The fact that sales volume was strong despite terrible weather is another plus, Sutt said about the first quarter.

She is not seeing a “a magical healing” of Santa Fe’s market from the federal tax credit, but a lot of things going on are positive, including low interest rates, cheaper land and labor costs.

On that point, Donna Reynolds, chief executive of the Realtors Association, said the number of inquiries coming into the association office were the highest they’d ever been after The New York Times published a travel story about Santa Fe style reinventing itself and a large image of the new Railyard Park.

Sill, longer-term numbers compiled by the Realtors indicate how far sales tumbled from earlier years.

The number of single-family homes sold countywide in 2009, for instance, was 966, which was less than the 1,437 sold in the year 2000 and half the 1,996 sold at the 2005 market peak.

Likewise, the total sales volume in 2009 was $540 million, slightly higher than the start of the decade, but a huge decline from the $1.2 billion in 2006.

Median sales prices started the decade at $235,000, peaked at $425,000 in 2007 and stood at $356,000 at the end of 2009.

New single-family home permits in the city of Santa Fe were flat in the first quarter, 48 in the period, up from 44 a year ago, said city planner Reed Liming. Eighteen of the 2010 permits were for multifamily attached homes, he added, with six of those going to a new complex at Paseo de Peralta near Washington Avenue.

 BY THE NUMBERS

• City of Santa Fe: Sales totaled 110 single-family homes in first quarter, up from 95 a year ago. Median sold price $464,000, up from $308,000.

• Unincorporated area: Sales of 95 single-family homes in first quarter, up from 82. Median sold price $318,224, down from $440,000.

• Condo/townhome sales: 62 in first quarter, up from 27. Median price $286,500, up from $248,000 a year ago.

• Total sales volume for homes stood at $92.1 million in the first quarter of 2010, up from $81.6 million last year.

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Of course, it talks about Santa Fe real estate, the local economy, and the views/thoughts of locals.

Here is the article:

As would be expected, there are many proponents and opponents to the project.  Some of the controversy lies in the purpose and use of the apartments.  Housing advocates are applauding the city for building such housing, while detractors are expressing disappointment in a lack of  “social” infrastructure affiliated with the project. They claim that there should be other services associated with the housing such as counselling and education.

The other controversy is who the builder will be.  Construction will create 87 jobs, which will be great for the local economy. However, according to an article in the New Mexican, only 40% of the potential builders vying for the job were from local companies.  Many people think that percentage should be 100%. However, the city wants the best bid, and the best bid may not come from locals. Some local contractors have expressed disappointment in the city for not accepting/considering their bids.

Here at HomesinSantaFeNM.com, we are advocates for both affordable housing and local business. Regardless of social infrastructure, we believe that any type of housing is  better than no housing at all.  As long as there are systems in place to prevent abuse of the program it will be at least a partial success in providing a roof for people who previously didn’t have one. And, hopefully, a local contract will put up a competitive bid and keep the project “in city” as well.

Link to the New Mexican Article Here

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The Home Affordable Modification Program (HAMP) is designed to help homeowners in states where home prices have fallen at least 20% statewide.  The five identified states are: Arizona, Nevada, California, Michigan, and Florida.  All of these markets have notoriously taken a big hit in the past few years due to previous rapid appreciation, speculation, and the weak economy.

Obama has blamed irresponsible lending practices for much of the problems, and is trying to make sure that the money is properly spent by state and local finance agencies. A very specific application process for lending institutions has been designed to create oversight for the program.

The program seeks to aid troubled homeowners by modifying their mortgage and lower their monthly interest rates through participating lenders. The lender then lowers the interest rate, and the feds provides subsidies to the lender and borrower. According to Herb Allison, assistant secretary of the Treasury for Financial Stability, the program should help approximately 3 to 4 million Americans before it terminates at the end of 2012. Currently, about 1 million homeowners have had their mortgages amended due to the plan.

Unfortunately, New Mexico isn’t currently part of the program, which does cause some concern.  Sure, our home prices haven’t dropped as a whole by 20%, but unemployment is high, and many homeowners are teetering on the edge of default. As with all governmental programs, this one may be ammended to fit more states, particularly if the money isn’t being spent in the currently eligible states.  Time will tell.

Contact Matt Desmond and Ryan Bolton

•Conduct a “draft check.”  Your heating dollars could be going out your windows, doors and electrical outlets. Check for air leaks throughout your home; check around doors, windows, fixtures, electrical outlets, wiring, plumbing and fireplace dampers.  Turn it into a family activity. Draft-proofing is the least expensive energy efficiency investment with the biggest payoff.

•Plug those air leaks. Seal leaks between doors or windows (and their frames) with weather stripping and between window frames and walls with sealant or caulk.

•Install door sweeps on the insides of exterior doors.  Cold air can seep in under doors. Solution: Door sweeps are cheap and keep the draft out. No sweeps available? Even a rolled up towel or blanket will help. And consider twin or dual draft guards on both sides of doors where you feel drafts.

•Open curtains and other window treatments on your west- and south-facing windows during the day to allow sunlight to naturally heat your home, and close them at night to make it harder for warm air to escape. If you are purchasing new drapes, consider an insulated lining, which reduces both heating and cooling bills.

•Freezing by your windows?  If that’s the case, and you’ve already plugged those window leaks and can’t afford new high-efficiency windows, consider purchasing a kit containing sheets of plastic film to tape over the insides of your windows. Use a hair dryer to create a tight fit.

•Consider insulating drafty electrical outlets. Use light switch foam insulation pads and wall jack foam insulation pads on outlets on colder exterior walls.

•You’re not in the South Seas.  Don’t turn up the heat so high that you can be comfortable dressed in a T-shirt and going barefoot. Even when indoors, dress for winter weather and layer clothing so that you can keep the thermostat at a reasonable yet comfortable temperature. It’s a good time to wear those holiday sweaters!•Consider a space heater for the room where you spend a lot of time.  But keep in mind that this makes sense from an energy standpoint only if you reduce heating in other rooms.•Keep furnace filters clean.  Check and change your filter every month during heavy-use winter months to assist air flow, so your system doesn’t have to work harder to keep you warm.

•Seal your heating and cooling ducts. In a typical house with a forced air system, about 20 percent of the air that moves through the duct system is lost due to leaks, holes and poorly connected ducts.  Sealing and insulating ducts increases their efficiency, lowers home energy bills and can often pay for itself in energy savings. Insulate ducts in unheated areas such as attics, crawlspaces and garages with duct insulation that carries an R-value of 6 or higher. Also, a well-designed and sealed duct system may make it possible to downsize to a smaller, less costly heating and cooling system that will provide better dehumidification.

•Let a programmable thermostat “remember for you” to lower the heat while your home is empty and/or overnight to reduce heating costs by up to 10 percent – and allow you to come home and wake up to a toasty, comfortable house.

Contact Matt Desmond and Ryan Bolton

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.

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There are probably many reasons for the drop in house size. The obvious one is economics. During the recent economic and housing downturn buyers are needing to save money, and, thus, sacraficing space. Smaller bedrooms, smaller kitchens, and less “extra” rooms (I always think of the two, not one, “present wrapping” rooms that were noted in the Beverly Hills estate of the late T.V. producer Aaron Spelling). Additionally, larger homes are more expensive to maintain, heat, cool, etc. Here at homesinsantafenm.com we have also noticed that some people are wanting to “simplify” their lives. They are accomplishing this by living in smaller, more manageable homes that cost less money both to buy and maintain.

Looking into the crystal ball, what do we see? In Santa Fe we still have clients looking for all types of houses.  Families still want larger houses that can accomodate all of their needs, some retirees still want large homes to entertain, and some buyers want room to grow and roam.  However, other buyers are wanting to downsize, some retirees want less space to manage, and some families are realizing that they need less space. Basically, there is still a market in Santa Fe for all sizes of homes.

Contact Ryan Bolton and Matt Desmond