The children, aged four and seven years old, and a man were swept downstream and later found dead, the mountain resort village said late Tuesday on its website, adding that rescue operations were underway.
Dramatic video footage on social media and various news outlets showed an entire house, ripped from its foundations, careening downstream through the brown, muddy waters of the flood-engorged Rio Ruidoso, side-swiping trees as it went.
"I've seen the video. We don't know if anyone was in the house," said Danielle Silva, a spokesperson for the New Mexico Department of Homeland Security and Emergency Management.
Emergency teams organised by local law enforcement and the National Guard conducted at least 85 swift-water rescues in and around Ruidoso, many of them people stranded in cars and homes by elevated flood waters, Silva said.
Silva said the river had quickly risen by a provisional record of 20.24 feet (6.2 metres) at the peak of the flood, and as waters began to recede in the evening, authorities began searching for survivors in the debris.
The latest floods come just four days after a deadly flash flood triggered by heavy rains along the Guadalupe River killed at least 109 people and left scores missing after ravaging a swath of Texas Hill Country.
In New Mexico, Silva said the severity of the debris flow was heightened by a flame-scarred landscape stripped of vegetation in a wildfire which was then followed by flooding that eroded the soil.
Ruidoso, a popular summer retreat as well as ski resort nestled in the Sierra Blanca mountain range of south-central New Mexico, is located about 115 miles (185 km) south of Albuquerque, the state's largest city.
(Reporting by Steve Gorman in Los Angeles; Additonal reporting by Nilutpal Timsina; Editing by Michael Perry and Bernadette Baum)
Clouds and smoke from the South Fork Fire seen from Capitan, New Mexico, USA 19 June 2024. According to a press release on 18 June from the New Mexico Department of Homeland Security and Emergency Management, 'wildfires, which ignited (17 June), have damaged more than 500 structures and led to the evacuation of the entire Village of Ruidoso. Further evacuations in nearby communities are possible. The fires have consumed nearly 20,000 acres and are currently 0% contained'. New Mexico Governor Michelle Lujan Grisham declared a state of emergency in New Mexicos Lincoln County and the Mescalero Apache Reservation and deployed members of the National Guard on 18 June. EPA-EFE/RAMSAY de GIVE