The housing market is more sea than land. It is constantly churning somewhere, even when things might appear calm. As The Feds work to get inflation under control without spinning us completely off course, uncertainty opens opportunities for some while diminishing them for others.
For roughly two years, most sellers (yes, sellers) benefited from ultra-low interest rates, unparalleled demand, and an exuberance of prices that kept going up.
Most buyers also benefited in as much as they secured cheap, long-term loans; found a place to live; and have immediate equity that might have otherwise taken years to build.
The level of exuberance has diminished, and that’s changed the marketplace. Some of that is fueled by this misconception that a crash is imminent. That’s naive and unlikely, as I will explain.
First, though, think about what’s coming off the top of sales prices as froth, sea foam, if you will. It’s what sellers could ask when buyers felt (and often were) desperate to find and purchase a home. And from my perspective, the new lower price points are essentially taking money out of the seller’s pocket and putting it in the bank’s in the form of higher interest rates.
It’s true that these higher mortgage interest rates have pushed some buyers out. But, there’s also a generally negative mood around upcoming elections. Together with inflation and a stumbling stock market, there’s more sense of risk around the economy. Combined, this is keeping many would-be buyers on the sidelines.
The appearance of housing scarcity has abated, but that’s something of a mirage in nearly every corner of America, including The Coachella Valley.
While the number of homes coming to market has increased some, keep in mind that many of the homes that sold during the pandemic were purchased with cash. As prices go down, those individuals and families will stay put until that asset value increases. The rest of those who purchased obtained crazy low-interest-rate loans. The appetite for these homeowners to upgrade or downsize isn’t going to be there without a big payday sale that offsets even the *idea* of a new, higher-rate mortgage.
All of this is to say that inventory is going to remain historically low, just for a different set of reasons when compared to the pandemic. It’s precisely what I observed in San Francisco during the great recession. Moreover, once sidelined buyers realize prices aren’t dropping off a cliff, they’re going to ease back into the market and thereby increase demand.
Low inventory and steady demand stabilize prices.
As retirement and second home destinations go, Palm Springs, Rancho Mirage, Palm Desert, and Indian Wells all have a following. There’s no indication that our valley is on a downward trajectory like some cities. Relative to other cosmopolitan communities with live theater; excellent restaurants; phenomenal natural beauty; recreation in the form of hiking, golf, and cycling; and world-renown festivals, e.g., Modernism Week, Coachella, and Stagecoach, we are on the ascent.
The value of our real estate is built-in and the pandemic simply opened to the world how that value could enhance one’s life. That’s not going away.
Consider this last point: as the froth subsides, buyers now have more choices in which house or condo they buy.
For the most part, there isn’t the pressure to make non-contingent offers. There’s also generally more seller willingness to negotiate, especially among those who need to sell.
I’d also wager that although a buyer has a higher interest rate (a portion of which they can deduct from their tax liability) a lower purchase price means a lower tax basis and, quite possibly, a similar monthly house payment.
My suggestion is to be working with an excellent real estate agent in Palm Springs capable of identifying the properties with the greatest objective value. You, then, have to determine if those select properties align with what you want in a new home.
When you’re ready to make that leap to our unique paradise, give me a call.
+1 (760) 325-1900