By Bruce Cathcart
I declare that SUMMER IS OFFICIALLY OVER! Not because the calendar says so, but because I was finally able to turn my air conditioner off and open up my windows during the day. And many “snow birds” have already been sighted driving at 25 miles an hour down Highway 111 with an occasional stopping in the middle of the road without warning and local realtors are all excited and looking forward in earnest to a great season this year… not the holiday season, but the selling season! I am doing my best not to go all Mr. Scroogie on their hopes and dreams for future sales, but with 10 months’ worth of solid data so far this year that continues to demonstrate a very lack luster performance of our local real estate market, I see nothing to get too excited about over the next few months.
In last months’ article I quoted the mainstream press in calling the current real estate market “stagnant” but I disagreed with the use of that term as it is an improper description. Calling a market stagnant assumes that it is supposed to be moving in one direction or another, and it is not. Looking at the actual sales numbers over the last 10 months has allowed us to see that the market has been very “stable”, following our seasonal sales pattern, just at a much slower pace than the politicians and pundits would like (and a heck of a lot slower than we Realtors like!). I have been referring to it as the “new norm”; certainly not a market in full recovery but just as certainly not a market in full retreat either. October’s numbers continue to support the new norm trend.
Last month (October), according to the Desert Area MLS (as of 11/01/14) there were 630 pendings of residential properties in the Coachella Valley. There were only 562 pendings in the previous month (September) representing again another significant increase in sales activity (approximately 11%) which follows our normal, seasonal sales pattern here in the Coachella Valley. In September there were only 482 solds (the lowest of the year) and in October there were 517 solds representing a small increase in closings, also following our seasonal sales pattern. When compared to last year, we closed 590 homes in October representing a year over year decrease of approximately 13% in home sales. Last year (2013) according the Desert Area MLS we closed a total of 7,668 residential units through November 1. This year we have only closed 6,713 residential units for the same time period. Sale prices are collectively up approximately 5% this year compared to as much as 30% in many Coachella Valley markets last year, but the number of properties sold (volume) is down a little over 13%.
Some have argued that the reason the number of sales is down is due to a lack of inventory on the market. This is not true. Inventory numbers this year have been very similar to those of last year and overall inventory available to buyers this month was up significantly (over 18%) from 3,242 properties available for sale at the beginning of October to 3,863 properties available for sale at the end of October. That represents a 35% increase in inventory since September 1, 2014! So if inventory isn’t the problem, what is?
It is a combination of a lot of things right now, but it is best summarized by what is referred to as the “Affordability Index”. The majority of today’s homebuyers just cannot qualify or afford to purchase a home. Coachella Valley wages have not kept up with housing price increases. Baby boomers have postponed their plans to retire to the desert. Millennials (those coming of home buying age in the 2,000’s) are burdened with student debt, can’t find a good paying job, and as many as 45% of them are back living with their parents. Credit card debt is out of control… the list of causes is long but really when you get to the bottom line it comes down to wages and jobs. There are a very limited number of good paying jobs with good security here in the Coachella Valley right now that allow our home grown and local home buyers to afford to buy a home. Likewise, our “feeder” markets (Orange County, L.A. and San Diego) are all struggling with the same issues. Until these circumstances change, look forward to more of the same. Welcome to the new norm.
Real Estate Tip of the month: This month the Fed announced the end of their Quantitative Easing Program. This policy helped to maintain our very unrealistically low interest rates. Without this program in place mortgage interest rates are sure to rise, it is just a matter of time. If you are a buyer, buy something and lock in your interest rate. If you are a seller, you will likely get a higher price for your home now while interest rates are still low. If you have an existing mortgage on your home ask your trusted real estate agent if it would make sense for you to refinance your loan NOW!
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.