By Bruce Cathcart
Happy New Year Everyone! With the month of December behind us we now have a complete year of data to review. Looking back we should be able to answer the question of whether or not 2014 was a good year for real estate in the Coachella Valley or if it was just another average year on our road to full recovery. In fact it may have been the proverbial one step back after two steps forward toward a more robust real estate market. We had a relatively strong finish to the year so first we’ll take a look at December’s numbers and then I will try and put 2014 in perspective for everyone before making my forecast for the Coachella Valley real estate market in 2015.
Last month (December), according to the Desert Area MLS (as of 01/02/15) there were only 574 pendings of residential properties here in the Coachella Valley. There were 732 pendings in the previous month (November) representing a significant decrease in sales activity (approximately 22%). This is quite normal following our seasonal (holiday) sales pattern in the Coachella Valley. In November there were 511 solds and in December, thanks to the combined increase in pending sales from October and November, there were 653 solds. This represents a significant increase in closings. This was a good strong finish for 2014 but when compared to last year, when we closed 740 homes in December, this continues our yearly trend with a year over year decrease of approximately 12% in home sales. Last month we saw home sale prices continue to stabilize and even go down in a few Coachella Valley neighborhoods. The final year over year sales volume for 2014 compared to 2013 was down by 11% as 2014 totaled 8,544 solds compared to 9,515 solds in 2013. That’s the one step backwards. From 2009 to 2013 the Coachella Valley has averaged approximately 9,575 solds each year making 2014 the first year representing a significant drop (11%) in the number of homes being sold.
Here’s the good news and perhaps our best step forward. Even though we sold approximately 1,000 fewer homes in 2014 than the year before, the total dollar volume was almost the same! In 2013 total sales amounted to $3,515,686,766.00 compared to 2014 where total sales volume was $3,508,396,336.00! That means we sold fewer houses at higher prices… approximately 11% higher overall, which was considerably higher than the national average for 2014.
Our inventory of homes for sale remained relatively unchanged at 4,606 as of January 2, 2015 compared to 4,659 at the beginning of December 2014. This is another step forward as this appears to be a good number right now for the Coachella Valley. It represents enough homes available to meet the current existing demand from buyers and will allow for stability in the marketplace as we move into 2015.
So what can we expect for 2015? Hopefully more of the same, or the new norm as I have called it. It is not great, but it is not horrible either. At current home prices and looking at the overall economy I do not see investors rushing back into the market anytime soon. I also do not see much progress being made in resolving many of the underlying causes keeping our first time home buyers out of the market here in the Coachella Valley (such as minimal employment opportunities and being saddled with student loans, increased medical insurance payments, car loans, cell phones, and in many cases children too!). There are two “wild cards” that we will want to watch closely in 2015 that can and will affect our market. The first is the interest rate on home mortgages. Last year we lived in fear of rising interest rates which all of the “experts” predicted would happen in 2014. The rates did not rise and in fact fluctuated to near historic lows during the year. Well, the experts are at it again, insisting that rates MUST rise in 2015. If they do this will likely have a very negative affect on our housing market by making homes more expensive and may even drive prices down. The second wild card to watch will be the price of oil and thus the cost of energy. Lower fuel prices mean lower everything prices… except housing. By spending less on fuel and other goods and services, buyers will have more money to pay for higher mortgages (or higher rents), thus increasing demand and home prices could go up. Obviously if interest rates go up and the price of oil goes down they could cancel each other out and our housing market will remain more or less the same.
Every New Year seems to start out full of optimism and hope for an even better year than the one just past. Even with our two steps forward and one step back in 2014 I feel that we are still moving in the right direction to a more robust real estate market here in the Coachella Valley. Our road to full recovery is just taking a little longer than any of us could have imagined.
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.