By Bruce Cathcart
The Coachella Valley has seen its share of Boom and Bust growth cycles. It always seems that the bigger the Boom, the bigger the bust that inevitably follows. I personally have experienced the boom of the late seventies and the bust of the early 1980’s, the boom from 1986 to 1992 and the bust of the middle nineties and then of course the biggest boom of all from the late nineties through the millennium and right up until about 2007 when the real estate bubble burst leading us into “the Great Recession”. What that meant for the Coachella Valley real estate market was a collapse of the construction industry, home values falling by as much as 50% and record numbers of homeowners defaulting on their mortgages and losing their homes to foreclosures or short sales. So here we are approximately 9 years after the crash trying to answer the big question… has our real estate market in the Coachella Valley fully recovered from the crash? Before I try and answer that question let’s do a quick check of last month’s sales numbers to see how we did compared to the month before and last year’s sales.
According to the Desert Area MLS (as of 07/01/16) there were 915 pendings of residential properties here in the Coachella Valley in June. That’s down from the 1,092 pendings in the previous month (May) but still showing good volume and representing a significant increase in pendings for the same time last year. In May there were 854 solds and in June we had 911 solds showing another month over month increase in closed sales. This is significant as normally June closings start to drop off and this year both pendings and closed sales are higher than in the last couple of years. Last year we sold only 824 homes in June. In summary, despite our slow start in 2016, thanks to this strong finish to our “selling season” we have now surpassed last year’s total sales through June and it looks like the high number of pendings will assure that July will be another good month for closings as well. Our inventory of homes for sale was significantly reduced again this month with only 4,450 homes available on June 30, 2016 compared to 4,906 homes available on June 1, 2016. That’s about a combined 20% reduction in inventory over the last two months and while typical for this time of year it continues the trend from a buyer’s market back to a Seller’s market. If this pattern continues through July we may find ourselves back in a Seller’s market by summer’s end. With the world markets in a bit of chaos due to “Brexit” it is very doubtful that the Fed will be increasing interest rates anytime soon and so interest rates will be staying at rock bottom likely through the summer months. So if you can stand the heat, now is a good time to be shopping for a home here in the Coachella Valley.
We have been tracking sales data for Coachella Valley real estate for several years now faithful readers of this column know that the Coachella Valley has not yet fully recovered from the crash. While real estate home prices in many metropolitan areas have fully recovered, most of our home prices here in the valley are still 20% to 30% off of our market highs from before the crash. (Here’s a quick example: A La Quinta Cove home that sold in 2007 for $300,000.00 and was valued at $150,000.00 in 2010 can be bought today for $235,000.00). This example is typical of most markets here in the Coachella Valley for homes in this price range and comprises the majority of the homes sold here… so clearly we have not recovered in terms of home prices. Foreclosures (and short sales) here in the Valley are at pre 2007 rates making up less than 5% of all sales. That’s good news as it takes what used to be the majority of “distressed sales” out of our market. Why then has our market not fully recovered? The simple answer is always supply and demand. Up until just the last few months our sales volume (the number of homes sold) has been decreasing each year despite an adequate amount of inventory. Canadian buyers have become sellers; student loans have taken the place of first time homebuyer’s mortgages; retirees have put their desert retirement plans on hold; and perhaps most significant, when we lost our construction industry we lost the high paying jobs and construction workers who made up a good portion of our buyers. This last issue is naturally a part of the boom-bust cycle for the desert as historically during the boom we over build exceeding the market demand. This time it was made worse by the financial meltdown on Wall Street with their mortgage shenanigans as well as building to accommodate the expanding construction industry. Here in the Coachella Valley we have always had two industries; the resort/hospitality industry and agriculture (we have no manufacturing per se, except that we manufacture fun for one of our industries and fruits and vegetables for the other!) For a while we fooled ourselves into thinking we had a third industry… the construction industry but it looks like it will be a while yet before we see its resurgence and homes being built here in the desert again on the magnitude that they were at the turn of the century, if ever. The Coachella Valley real estate market has not yet recovered, but I see our valley still in recovery and I am optimistic as I see the amazing growth in the resort/ hospitality industry with music festivals, tennis/golf tournaments, art festivals, new hotels, and vacation rentals. We need only look to our successes in the past to point the way to our successful future.
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.