Feb. 28th, 2010

Had a conversation with [livejournal.com profile] hotelbearsf about this the other day, and it's a topic other friends have brought up. Is it time to buy in Palm Springs?
The real estate world was very different in the Coachella Valley five years ago. Prospective buyers streamed through model homes while real estate agents poked pins onto maps to reflect constant sales — some posting $10,000 price gains by the month. Phones rang incessantly. Common were bidding wars, waiting lists, lotteries and house-flippers, the latter often cashing out six-digit profits.

It was fast and frenzied in 2005 as price seemed to be no object and affordability dissipated, squeezing many families out of the market.

The picture is a stark contrast to today’s market. The data, filtered from the Multiple Listing Service, market activity in key valley areas show that sales are up 25 percent compared to 2008. Overall sales volume is down 15 percent. Of 9,238 total home sales, 8,204 sold for $500,000 or less. The average sales price of homes below $500,000 was $182,369. That was 22 percent less than in 2008, when the average sales price was $236,160.

The sale of homes priced from $500,000 to $750,000 fell 21 percent. Of 9,238 total home sales, 452 homes sold above $750,000. Prices are so low that prospective buyers with cash, a ‘golden’ credit record, resilient investment portfolio and job security are swooping in to snag homes at prices not seen in nearly a decade.
And then there's this, from the Desert Sun:
John Husing is a longtime economist who focuses on Riverside and San Bernardino counties. Husing, ‘The critical question is one that can’t be answered: We don’t know for sure whether banks are going to, at some point, act precipitously against homeowners who are in trouble, but who — up until now — they’ve been allowing to slide.’

‘There are roughly 250,000 Notices of Default on file in Riverside and San Bernardino counties. We know there are more houses that are upside-down than that, so we don’t know if banks are holding off on the trustee’s sale or on evictions, the final act of foreclosure. With inventory on bank-owned homes down 50 percent, the market is acting precisely as predicted: Prices are slowly rising. Volume has made a big jump. Realtors are complaining about lack of supply.’

‘If banks do change their mind, aggressively take people’s houses and dump them on the market, then all bets are off: We could get double-dip recession. My forecast is, that won’t happen.’ Best advice for buyers: ‘If you don’t buy now, you’re nuts.’

My view: government and bank actions have acted to artificially slow the repricing and selling of houses in default, and there's going to be a long period when short sales and foreclosures will put downward pressure on the housing market most places, but especially in speculative second-home communities like Palm Springs. I think it's an okay time to buy carefully, but also think there's a chance of further declines -- prices are after all still much higher than is supportable by local incomes, and any pent-up demand from people wanting to get in at the bottom to speculate is about over.

Some of the places we've looked at in the past, like 48@Arenas and the Montage development in Cathedral City, now show price declines of over 50% from peak.

We'll be going down there to investigate buying a house....

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drscott

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