Market Update October 1, 2020
Despite the real estate market booming in many suburbs in the US, that has not yet spilled over to San Miguel de Allende. I suspect the biggest reason is a combination of the difficulties that the pandemic has brought to families, work and businesses and the hesitancy to travel until covid is more under control. Our website and email activity continues at almost the same pace as before the pandemic, which indicates that there is still a strong interest in San Miguel. And although we have had a few clients make the trip to purchase a property while the conditions are favorable, many more seem to be waiting until the new year. We've also had more absentee buyers this year than ever before. Most of them already know San Miguel, so have a good idea of what they will end up with, but the fact that we have had so many sight unseen sales close with a power of attorney, also speaks to the difficulties of the times.
MARKET ACTIVITY SEPTEMBER 2020
26 - Announced Under Contract
26 - Actual Closings
47 - New Listings
40 - Price Reductions
11 - Taken Off The Market
867 - Total Properties Listed
$537,000 - Median Price of All Properties
$435,000 - Median Price of New Properties Listed
$289,750 - Median Sold Price
33 - Months Of Inventory (based on actual closings to toal properties listed)
New Listings minus those Taken Off The Market continues to outpace Actual Closings, which means the inventory is continuing to grow. The Actual Closings in September were much higher than the quarantine months of March through June. It's also encouraging to see so many price reductions. However, there is still a substantial disconnect between the median price of New Properties LIsted and the Median Sold Price. This is somewhat always the case in San Miguel as there are a lot of overpriced homes on the market. Our algorithm indicates that 50% of the homes on the market are overpriced and you can read more about this in a couple of other Market Updates that I have posted recently.
What This Means to Sellers
If you are a seller, I will just leave you with the fact that there are more than 33 months of inventory on the market. Which means in brief, that you only have a one in three chance of selling your home in the next twelve months. The closer the price of your home is to a million dollars the more months of inventory there are. Read some of my other Market Updates or Clients Need To Know articles where I talk about your options and what will give your home the best chance of selling. Also, read Why LIst With Us, which you can access in the main menu under the Real Estate tab. We are living in the age of the internet and no one can give your property more exposure than Realty San Miguel. We have more web traffic than your top seven competitors combined.
What This Means to Buyers
As much as I would like to tell you to "get here quickly, it's a buyer's market," that is really only partially true. Although our algorithm shows that 50% of all homes on the market are overpriced, our algorithm has also singled out a substantial percentage of homes that are aggressively priced. A few priced even 40% below the mid-2018 peak of the market. Fortunately, all of our agents are up to date on the market and can help you find your dream home at a reasonable price. In every market, there are always motivated sellers.
Where's The Market Going?
Frankly it's not clear and there are a lot of conflicting signals, but I will explain the dynamics that affect our market and what I am keeping my eye on.
- Tracking 34 years of cycles in San Miguel, we should continue on a downward trend both in volume and prices. However, SMA is probably way more connected to the global economy today than it was even 15 years ago so this cycle may not track with the previous cycles.
- Homes sales are hot and often selling for above asking in many suburbs and rural areas of the US. This will provide liquidity for those wanting to move here from those areas. However, those wanting to move here to escape a big city may have a harder time selling their home and have to sell it for less than they were wanting. At this point, the US real estate trends seem to balance each other out in their effect on SMA.
- Although it seems like our clients are less vested in the stock market than they were in 2008, the fact that the markets are booming and touching all time highs tends to spill over to optimism and consumer confidence. This will only help San Miguel.
- Following every election since I've been here we see a small influx of people moving here because the candidate they didn't want to win won. I have no doubt that this will happen again in 2021 no matter who wins. This will only help real estate sales in SMA. However, there is a chance that the stock markets may react to the winner of the election and at least dampen the benefits to San Miguel that come with a strong US stock market.
- Mentioning Covid probably should have been first on my list. As you are aware, it has disrupted life as we know it and it's really not clear how it will affect San Miguel's real estate market long term or our lives in general. Short term, the travel restrictions have obviously hurt SMA and as long as there is an associated risk with flying, it will continue to hurt. At the minimum, it will limit the number of people willing to travel here and delay plans of moving or having a seasonal home here. If either the perceived or real risk continues, then it will badly hurt the market here as people who would have moved here decide to stay closer to home. Any lack of activity from Americans and Canadians may be offset somewhat by the increased activity we are seeing from Mexicans driving here from the larger cities. From tracking our website visits and email volume it appears that interest in San Miguel is still very high and that covid has simply delayed the plans of most. Of course I am hoping that this is the case and that covid's will continue to fade away.
- With between 33 to 47 months of inventory (depending on which month's sales you measure) I can't see there being home price appreciation for quite some time. Even if covid lifts completely and there is a boom of sales for a period, I don't think it can reduce the inventory enough for prices to increase. The last boom in price increases were in early 2017 when there were only 175 resale homes on the market. Today there are 867.
Weighing all of the above, at best I expect for sales volume and prices to remain flat. At worst, I would expect prices to continue to decline. From carefully tracking the declining and then flat SMA markets from the 2008 global financial crisis through 2015, the main thing I learned is that there are always motivated sellers who reduce their price or will negotiate much lower than the asking price. In a declining or flat market here, the whole market won't shift overnight, but every month several sellers either come under financial pressures that motivate them to sell for a lesser price or sellers will just decide that they don't want to wait for better times and want to move on with their lives. These sellers are the ones that create the opportunities for buyers no matter what the market signals indicate.
COVID STATSAs of the end of September there have appeared to be 556 total cases in San Miguel with 469 considered recovered. 36 cases were under investigation and there have been 30 deaths classified as covid positive. An article from the capital indicated that cases were on the decline in the state of Guanajuato.
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