By Bruce Cathcart
Have recent events in the stock market got you down and feeling blue? Is it a bull or a bear market, just a correction or a full blown crash? If you are like me (and millions of others) it is not the first time your heart sank when you checked the value of your stock portfolio online… but it could be the last! For most of us the single largest investment that we will make in our lifetime (not including our children!) will be our home. Unfortunately too few of us think of “investing” in a second or third home and so our extra investment cash or money socked away in our IRA and 401K retirement accounts gets put into the stock market. Well I for one am getting darn tired of the ups and downs of a stock market that seem only to favor the insiders on Wall Street. Also, the idea that my entire investment stock portfolio and retirement accounts could be erased with a single keystroke on some broker or government computer does not help me to sleep well at night either! It’s time to change our thinking about how to safely invest our savings into something more than just a piece of paper or an electronic statement, the value of which is completely beyond our control.
Before I share some more thoughts on this subject, let’s take a quick look at the real estate sales activity for the Coachella Valley for the month of August. At the end of July we learned that we were falling further behind last year’s total number of sales, but we had hoped that increased pending sales would result in higher August closings and help us to catch up. Here’s what happened.
According to the Desert Area MLS (as of 09/01/15) there were 700 pendings of residential properties here in the Coachella Valley in August. There were 718 pendings in the previous month (July) which is typical of our summer sales pattern. Looking at the pendings from August of last year (2014) there were only 435 pendings. So this is another year over year increase in pendings activity for 2015 and continued improvement in sales activity over last year. In July there were 689 solds and in August we had 605 solds. Compared to last year in August, we sold 607 homes. This number is extremely disappointing as it once again keeps us behind last year’s numbers for total sales volume. Though the year over year gap is small, it does not make up for the lower sales volume from the previous months in 2015. Here again, higher pending activity is not showing up as higher sold activity. I am hopeful that this is due to delays in closings resulting from financing and other challenges present in today’s market. September could post a huge year over year gain in closings… but we’ll just have to wait and see if that occurs next month. We need a really good month to reverse our downward trend in sales volume that has continued through most of 2015.
Our inventory of homes for sale dropped only slightly this month with 3,657 homes available as of August 1, 2015 compared to only 3,611 as of September 1, 2015. That’s a huge stabilization of our inventory with 754 MORE homes on the market today when compared to the same time last year. This will take the pressure off for prices to increase and I expect this trend to continue through the end of the year. Typically more homes get placed on the market in anticipation of the upcoming “selling” season and our inventory increases. Combining a falling stock market, a strong US dollar, little or no wage appreciation with the possibility of higher interest rates and we may actually see prices in the Coachella Valley come down by the end of the year.
As an investor in the stock market it seems that we have two options. Buy a stock and hope the value goes up and then sell it at a profit or buy a stock that pays an annual dividend. Dividends are usually pennies on the dollar, but none the less they reward us with a little income while we wait for the stock to go up. We have little or no control over the stock’s value or the amount of the dividend that stock pays but it costs one nothing to just hold the stock. On the other hand, if one purchases a second home as a rental you can hire a property manager to rent and manage the income and expenses and depending upon if you use a loan or not to purchase the home, you can usually generate a significant positive cash flow while you wait for the value to go up. The two big differences that I see are that with house you can influence the value of your home by making improvements to the property (value added) and perhaps most important, no one can make it disappear with a single stroke on a computer keyboard. This is a very simple example of some basic differences between investing in stocks versus houses, but if this cure for the stock market blues appeals to you I recommend that you to speak with your trusted Real Estate professional about the possibilities available to you today. They may even be able to show you how you can hold real estate in your retirement account!
Join me each month this year as we keep a close eye on our Coachella Valley real estate market. If you have a real estate question or concerns please email me at the address below.
Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “Your Friendly Professionals” and can be reached by email at firstname.lastname@example.org or visit his website at www.laquintapalmsrealty.com.