by Janice Klein Schmidt
April 30, 2019
Palm Springs Life Magazine
You need no expertise to notice the healthy condition of Coachella Valley real estate. But it’s fascinating to uncover — and, if you’re looking to buy or sell, important to know — the nuances of the marketplace: 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.
Palm Springs Life asked six local experts — 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 — to explain where the market stands, how we arrived here, and what indicators suggest for the next year or longer.
THESE ARE THE FIVE THINGS WE LEARNED.
- Palm Springs is hot, and we should keep an eye on Rancho Mirage.
“Palm Springs is already above the high of 2006, though all nine [Coachella Valley] cities have done well,” 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.”
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,” 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.”
However, 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,” Sandahl says. “Rancho Mirage is undervalued. I think it will have the highest gain in price over the next 24 to
- Real estate sales benefit from robust business conditions.
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.”
- 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, Sandahl says. He further adds that older generations are “not thinking paycheck to paycheck; they’re thinking memory to experience.”
- Be prepared for surprises.
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.
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,” 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, Anderson says, adding, “I thought we might have flat growth. We really have become a year-round market.”
- More people are selling their properties elsewhere and finding value in the desert.
Deville says buyers from other markets, especially Los Angeles, perceive the Coachella Valley as a great value. And, 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,” 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, 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.”
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.”
BY THE NUMBERS
50% of buyers become remote owners, using the property as a second home or as an investment. The remaining buyers occupy their new homes.
73.6% of attached homes are remotely owned.
3,398 units on the market on Jan. 1, 2019, represent the
lowest inventory in the Coachella Valley in 10 years.
67.8% of remote owners come from other California cities.
The state closest in sales to California is Washington
(at 6%). Foreign buyers, largely from Canada, represent
14% of remote owners.
9.3%increase represents a solid gain in the median price per square foot for an attached home, while the median price per square foot for detached homes increased by 6.2%.
$441,710,200 in sales at the Coachella Valley’s top country clubs represents the highest volume of units sold (170) in 14 years.
The closest year in sales was 2013, when 145 units sold for $305,115,600.
31.9% of remote owners from California cities live in the Coachella Valley, followed by Los Angeles County (25.5%), Orange County (12.1%), and San Diego County (5.7%).
Source: Market Watch LLC in association with Housing Demographics Inc