By Bruce Cathcart
These days I am constantly being asked what is happening in the real estate market. It is a fair question to ask any Coachella Valley real estate broker or agent. In 2005 to 2006 the answer would have been the same from everyone and would have been something like “The market is GREAT! Prices are up, financing is easy (maybe a little too easy?), awesome new homes, plenty of used homes, investment homes, an endless supply of buyers, things just could not be better!” Then in 2008 to 2009 the answer would again be the same from everyone except it would have sounded a little different, more like “The market is horrible! Prices have crashed, the banks don’t want to make loans, REO’s have flooded the market, things could not be worse!”. Today you will get 10 different answers from 10 different brokers or agents. So what is the truth about today’s real estate market?
According to the “presstitutes” the recovery of the housing market is practically a done deal. Prices are up, construction is up, new home sales are up, REO’s are practically non-existent, even the number of short sales is down significantly… and they have the graphs and diagrams to prove it! Surely with all of these positive statistics we must be well on the road to recovery, aren’t we? Maybe.
Here is what I see when I look out my window. The interest rate has increased approximately one percentage point (from 3.5% to 4.5%) in the past 6 weeks. Home prices have increased approximately 10 to 20 percent in the Coachella Valley for most homes priced under $400,000.00 in the past 120 days. When these two statistics are taken together it means that the cost for the first time homebuyer or even just the average homebuyer who is getting a loan to purchase their home here in the Coachella Valley has increased approximately 33%. How many of us “working class” residents here in the Coachella Valley have received a 33% raise on our wages in the last 4 months? So the bottom line is that many entry level buyers just got priced out of the market and those that a few short months ago could have afforded a better home in a better neighborhood must now settle for less.
There has been a noticeable “pause” in the local market as several homes that were previously under contract (mostly failed short sales) are now coming back on the market. According to TrendVision (provided to me through our Desert Area Multiple Listing Service) Coachella Valley inventory is slowly creeping back up and many prices are beginning to edge down again. This could be the result of this being the summer where our sales activity traditionally falls off, but maybe not. We’ll just have to wait and see if this trend continues for the next few months.
The number of foreclosures resulting in REO’s is still way down and REO’s are no longer a significant factor in our market. In addition, the very aggressive (and now required by law) loan modifications have managed to keep many homeowners previously in default on their mortgages in their homes. This has limited the number of short sales coming on the market and continues to keep new listings of homes for sale in relatively short supply.
And finally, I am now seeing a few builders building and successfully selling small housing projects around the valley. Many of the larger developers are getting ready to build new developments as well as buying up the lots in the previously unfinished developments and preparing to start construction on new homes there. While the timing of these larger projects may still be a year away, they do hold the potential to increase inventory and create more opportunities for Coachella Valley homebuyers. Sunshine? Maybe, we will just have to wait and see.
This week’s real estate tip: As a buyer in the current market you can do two things to make homes more affordable. By making a larger down payment you can reduce the amount of your loan. In addition, you can reduce the interest rate on your loan by paying additional cash up front for “loan discount” points. Both methods will lower the amount of your monthly payments! First time homebuyers see Mom and Dad about the possibility of a little help here.
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.