REAL ESTATE MARKET REPORT FOR THE COACHELLA VALLEY 3RD QUARTER
WHAT A DIFFERENCE A YEAR MAKES
Market activity during the summer of 2020 was one of the best we’ve ever had. Strong Buyer demand and limited inventory created bidding wars among some Buyers, pushing prices higher in every price category. We can see what the impact of low inventory over a sustained period has on a market. While the 2021 year over year total sales volume is down by a large margin, the average sale price was up significantly. As our Real Estate Market Report for the Coachella Valley shows.
ARE WE IN A HOUSING BUBBLE?
Let’s compare the current 2021 real estate market to 2008 /2009 mortgage crisis. Starting in 2005 we had very loose lending guidelines. In simple terms – No down payment, no income verification, interest only or variable interest rate loans with super low teaser rates in the beginning were prevalent. This practice inflated Buyer demand which in turn pushed home prices up. A record number of homeowners who purchased with no money down were able to do cash-out refi’s, as it looked like there was no end in sight for higher home prices… until the market turned. The low teaser rates reset to higher rates that many homeowners could no longer afford, creating a cascading effect on the real estate market. Which led many to ask; has the California real estate market reached a tipping point
FAST FORWARD TO 2021
Today, we have much stricter lending guidelines. Buyers have more “skin in the game” so to speak, they must come in with more money down and need to prove ability to repay the loan. Tappable equity is growing, but this time Homeowners who are doing cash out refi’s, have more equity and are using the cash differently; largely to pay off debt, send a child to college or open a new business.
Only 1.4% of Homeowners exiting Forbearance between 6/1/2020 – 8/28/2021 were short sale or deed in lieu. 82.7% were current on their mortgage or have a repayment plan in place.
THE MAIN DRIVER OF LOW INVENTORY
There are many contributing factors, but lack of new construction for single family homes is the biggest reason for sustained low inventory. We’ve had 13 straight years below the 50-year average of new construction. Banks, after getting burned so badly during the mortgage crisis were no longer funding new construction, which has contributed to the long-term deficit in inventory. The pandemic also added to the mix – would be home sellers became reluctant to sell; either uncomfortable with strangers entering their homes for fear of COVID or worried they couldn’t find another home to move to in this low inventory environment.
WHERE DO WE GO FROM HERE?
Starting in August we had a slight increase in inventory and leveling in sales creating more “normal” market conditions. Buyers are more willing to pull back, not wanting to over-bid fearing they could be over-paying. However, as interest rates start to inch up, the market will pull back to find a new balance. In the initial phase of rate increases we typically see Buyer’s who were sitting on the fence re-enter the market, fearing they could miss out on historic low mortgage interest rates. We’re in a Sweet Spot for Home Sellers, suggesting now is the right time to sell.
VALLEY MEDIAN PRICE
Our Real Estate Market Report shows, as of September 30, 2021, the median price for a detached home in the Coachella Valley is $585,000. A 14.7% increase over the past 12 months.
One year ago, we averaged 1,077 sales per month. This year we’re averaging 860 sales per month. Down considerably from last year, BUT still up from previous years when we averaged 758 – 780 sales per month.
Every city in the Valley has seen a year over year increase in median sale prices as shown in our Real Estate Market Report. Indian Wells was the largest with 42.8% followed by Indio at 32.2% and Palm Springs at 29.7%. Rancho Mirage was the only city still slightly below the all-time highs of 2006.
12 Month Change in Median Prices by City
HOME SALES BY PRICE RANGE
When we look at sales by price bracket, we see homes priced over $500,000 have pretty much maintained or exceeded sales volume. While homes priced below $400,000 had a large drop in sales. Due largely to lack of inventory in this price category.
We have up to date Market Reports available for each city in the Desert, if you want more detailed information, let me know.
Like many other areas of the country, The Greater Palm Springs Area Real Estate Market has been on fire. As you can see in the chart above, sales for homes priced above $1m are out-pacing sales between the $500,000 – $1m price-band. Some of that represents homes that were previously in the $800,000 – $900,000 price range and have been pushed up into the $1m+ price range from price appreciation.
Your decision in selecting the right real estate professional to help you find your Desert Dream Home should be based their knowledge of the inventory, local market values and trends, and distinguishing features of each community.
We are one of the top teams in the Desert for a reason and we’re on standby to help you find your perfect Desert Home. Let’s Chat! Drop us a line to schedule your consultation today.