They say it’s a dry heat down in the Southwest, and that’s true now more than ever. The enduring megadrought that has gripped the region for the past 24 years is officially the driest multi-decade period in the area since at least 800 BC, according to Nature Portfolio.
The phenomenon has endured so persistently that the U.S. Bureau of Reclamation in 2022 mandated that some states reduce how much water they draw from the Colorado River, which runs through or borders three of the region’s four states — Arizona, Nevada, New Mexico and Utah. The Grand Canyon State was dealt the largest blow, losing some 592,000 acre-feet of water allocation in 2023 — a 21% cut to its previous share.
The bureau’s declaration was prompted by historically low water levels in Nevada’s Lake Mead, a reservoir formed on the Colorado by Hoover Dam. It’s the largest water reservoir in the country, and like the river that feeds it, it has been withered by the prolonged dry period. Southern Nevada, which withdraws much of its water supply from Lake Mead, had already taken a reduction of 7 billion gallons (enough water to serve 45,000 homes) in 2022; starting in 2023, that allocation was further slashed by an additional 1.1 billion gallons.
Even the record-breaking precipitation the infamously parched region recently experienced wasn’t enough to officially halt the drought, according to researchers. While the atmospheric river that flowed through the area in the first quarter of 2024 dumped enough heavy rain to virtually eliminate drought in nearby California, recent maps issued the U.S. Drought Monitor still show that nearly all of Arizona and New Mexico remain enveloped in conditions ranging from “abnormally dry” to “exceptional drought.”
Such extreme conditions, however, haven’t stopped the area’s burgeoning population growth. According to estimates from the U.S. Census Bureau, Arizona ranks fifth among states in population growth from 2020 to 2023. Utah, in eighth, and Nevada, in 14th, aren’t far behind. Drought or no drought, would-be residents are drawn by the area’s innate natural beauty and vibrant cities like Las Vegas, Phoenix and Salt Lake City, all large metros that offer plenty of urban amenities with a fraction of the home prices in relatively nearby coastal hubs like Los Angeles and the San Francisco Bay Area.
The problem, of course, isn’t new. Several water conservation plans have been discussed and agreed upon between the Southwest region’s states and their neighbors, including one last year that aims to conserve 3 million acre-feet of water by 2026. Scientific journals from 2010 and earlier, meanwhile, have predicted perpetual declines in water sources within the region given the bell curve of its population gains.
But the influx of residents into the Southwest from West Coast gateways was amplified immensely during the pandemic housing boom, and while some of that has been blunted by post-COVID regression (and skyrocketing home prices in cities like Phoenix and Las Vegas), the pipeline of prospective residents remains robust. Couple that growth with the water needed by the area’s agricultural and livestock industries, and you’ve got a difficult water situation in the notoriously arid region that will require ongoing scrutiny in the years — and likely decades — ahead. ●
Home values in the Southwest Region continued to appreciate in the first quarter of 2024. Nevada’s typical home value rose 3.4% to $426,267, according to Zillow’s Home Values Index. Arizona’s rose 4.3% to $426,680, and New Mexico’s rose 4.4% to $292,280. Utah’s rose a little over half a percent to $509,433.
Median sales prices also saw modest growth across the region. The median home in Arizona sold for $348,915 in March, a change of about 1% from March of 2023, according to Arizona Realtors. Listings were up 6.3% year over year (YOY), and inventory was up 19.6% to 4.28 months. The median New Mexico home sold for $329,000 in February, according to the New Mexico Association of Realtors, up nearly 8% YOY. Listings were up 7% YOY, and inventory was up 2.1% by sheer count of homes, according to Redfin. But demand rose too, and the number of months of inventory fell from five to four.
In Utah, the median home sold for $490,000 in February, up 5.4% YOY, according to the Utah Association of Realtors. Listings were up a whopping 15.6% YOY, and inventory was flat, remaining at a three months’ supply. Nevada saw the largest increase in median sale price, rising 9.6% YOY to $446,200 in February, according to Redfin. Listings were up 23.5% YOY, but months of inventory fell from three to two, indicating a very hot market.
What the Locals Say
I originate across most of New Mexico, especially in the Albuquerque metro area. I’d say the whole state’s homebuying market is stable — about a seven on a scale of one to 10. The only problem we’re having is with first-time homebuyers trying to get into those lower priced homes, at $250,000 or less. It’s very competitive, maybe a 20% chance of your offer getting accepted. Up to $350,000, a 50% chance. $350,000-plus, probably a 60%-70% chance. The higher the purchase price, the better the odds.
Right now, the New Mexico Mortgage Finance Authority bond program for first-time homebuyers is very popular. It’s an FHA (Federal Housing Administration) or a conventional loan with a piggyback loan from the state of New Mexico for downpayment assistance and closing costs. It’s in high demand.
We’ve seen an influx from California, and some from back East, which has really driven up our prices; it’s a huge factor in our market. A million bucks out there isn’t the same as it is here — that’s a lot of money in New Mexico. But home prices are flattening out from the peak.
People are moving here because we have great weather, a unique setting in the mountainous high desert, and we’re affordable compared to other parts of the country. The overall culture is laid back and relaxed – the ‘Land of Mañana,’ or the ‘Land of Tomorrow,’ as they call it. I’m ninth generation New Mexican, so I’m a little biased, but I have nothing but a bright outlook on the future. It’s a desirable place to live and a lot of people across the country are catching on to that real fast. I think the next five to 10 years for Albuquerque and the New Mexico market are going to be record-setting.
Loan officer
Waterstone Mortgage
Sources: BoiseDev, AZ Family CBS 5, City of Las Vegas, National Library of Medicine, Nature Portfolio, U.S. Bureau of Reclamation, U.S. Census, U.S. Drought Monitor, Zillow
