In a recent Palm Springs Life Magazine article, Janice Kleinschmidt takes a look at the nuances of the Coachella Valley residential real estate market, including where you’ll find the highest prices and best values, what drives fluctuations in sales, who’s moving to the area, and how certain conditions catch even the region’s most knowledgeable real estate minds by surprise. The author asked Walter Neil, CEO of Franklin Loan Center, George Rider, desert manager of Compass, Ron Gerlich, vice president and chief operating officer of HK Lane, Bob Deville, co-founder and broker, and Chris Anderson, general manager, of Bennion Deville Homes, and Keller Williams agent Brady Sandahl for their take on where the market stands, how we arrived here, and what indicators suggest for the next year or so. Here are five things the author learned:
1. Palm Springs Is Hot But Keep An Eye On Rancho Mirage.
· “Palm Springs is already above the high of 2006, though all nine [Coachella Valley] cities have done well,” Walter Neil says, referring to the peak period before the 2008 market crash. “There’s interest in the Palm Springs market because of growth in hotels and restaurants.”
· George Rider concurs and adds, “Palm Desert, La Quinta, and Desert Hot Springs are doing well, while Coachella and Rancho Mirage have gotten the least return.”
· “Our Palm Springs team sold more than $80 million last year. The majority of their sales were over $1 million,” Ron Gerlich says. “A lot of potential buyers have been priced out of that market and are moving to Cathedral City and areas of Palm Desert. Every city has its own amenities and attributes,” he notes. “Palm Springs and La Quinta are the two most active markets. Rancho Mirage is not as active, with fewer properties on the market, but it is one of the best maintained cities in the desert.”
· Chris Anderson says Bennion Deville Homes saw “a significant increase” in Rancho Mirage transactions in 2018. “Higher price-point buyers were getting frustrated with multiple-offer situations [in Palm Springs], and that wasn’t happening in Rancho Mirage,” he says.
· “Palm Springs clearly has a high number of transactions, and Cathedral City has the most affordable options,” Brady Sandahl says. “Rancho Mirage is undervalued. I think it will have the highest gain in price over the next 24 to 36 months.”
2. Real Estate Sales Benefit From Robust Business Conditions.
· Ron Gerlich credits the resurgence of Palm Springs’ downtown as a catalyst to the city’s momentum; Rider suggests the cannabis-growing industry aids the housing markets in Desert Hot Springs, Indio, and Coachella, saying, “It brings investment and employment opportunities. With development comes a better lifestyle, and a better lifestyle draws homebuyers.”
3. Lending factors bear less relevance in the Coachella Valley.
· Between 50 and 60 percent of the area’s buyers pay cash, and interest rates, even as they have risen, still seem low to the desert demographic that recalls the double-digit rates of the late 1970s through the ’80s, Brady Sandahl says. He further adds that older generations are “not thinking paycheck to paycheck; they’re thinking memory to experience.”
4. Be prepared for surprises.
· Walter Neil didn’t expect inventory to drop so low. The number of residential properties on the market on Jan. 1, 2019, was 3,398, down from highs of 5,898 on the same date in 2011 and 5,092 in 2016 — and even down from a low 3,753 in 2018 (the 10-year mean being 4,444). Across the valley, days on the market in 2018 decreased by 12 percent from the previous year. “I think you have a lot of inventory on the sidelines because people think the market is going to go up,” he says.
· Brady Sandahl was caught off guard by the high degree of price sensitivity in the past year. “We had a property listed at $589,000 on the market for three weeks with no offers,” he remarks. “We lowered the price [by] $20,000 and got multiple offers.”
· “The biggest surprise to me was the way business dropped off in December and January, because everything was going strong until November,” Ron Gerlich says. “A lot of it had to do with what’s going on in the world and people waiting to see what would happen.”
· July marked one of Bennion Deville’s best sales months of 2018, Chris Anderson says, adding, “I thought we might have flat growth. We really have become a year-round market.”
5. More people are selling their properties elsewhere and finding value in the desert.
· Bob Deville says buyers from other markets, especially Los Angeles, perceive the Coachella Valley as a great value.
· And, Brady Sandahl explains, “As key markets in the country soften, aging homeowners are cashing out and parking their money in lifestyle and retirement markets. That drives sales here.”
· “Things still look like a bargain here,” Ron Gerlich intones. “The same-size home in a metro area brings more. I think, with more and more [signature events and commercial development] going on in the desert, that there is going to come a time when the area will just explode.”
· Meanwhile, Ron Gerlich reports that 2018 was HK Lane’s best since its 2009 inception, despite a lull during the last 45 days of the year. “We anticipate fewer sales this year, but prices are up such that sales volume will probably be about the same,” he says. “In 2018, we did $747 million in sales. In 2017, we did $701 million, and in 2016, $601 million. We anticipate overall for the desert appreciation of probably 5 to 6 percent in 2019.”
· Walter Neil offers a similar projection: “We are looking at home prices increasing anywhere between 3 to 5 percent in the next six to 12 months,” he says. “The condo market is still undervalued and will probably appreciate pretty aggressively in 2019.”
To read Janice Kleinschmidt’s original article, courtesy of Palm Springs Life Magazine, please visit: https://www.palmspringslife.com/palm-springs-real-estate-market/