Graphs Say A Lot

Housing and house pricing is susceptible to the pressures of supply and demand. Like toilet paper, the perception as you walk down the Costco isle is that there's an endless quantity just sitting there at the ready for when I want it. BUT, as we all discovered, that's only true when the demand is in sync with the supply.

With housing, when demand soars and supply can't keep pace, which is natural given the lead time to make more, prices spike.

As demand wanes, prices soften. No longer desperate, shoppers linger all that much more to study options. And, unless the seller needs to "move product," they wait for buyer to bite.

Housing follows this exact pattern.

When -and it will happen someday- demand for our desert homes will slow. Gone will be the intense desire to take Zoom meetings poolside or hangout after open-air dinners at one of our many fine restaurants.

Will our market "TANK" just like the post-boom fallout of 2008? Not likely at ALL.

Why? We have fundamentally different financing dynamics today than we did compared to the 2000s run-up.

In those days, a buyer just needed a pulse and a few thousand dollars to buy property on the fantasy that home prices would only go up. That's called speculation, and we had a government with few regulations to guard against it. Think pre-1929 stock market crash. Post crash, all sort of rules, regulations, and laws were implemented to guard against sharks preying on unsophisticated investors. Today, borrowers are required to have income, resources, and a downpayment, usually of at least 20%.

That makes a BIG difference for two reasons. First, if prices soften, we'd have to see them fall at least 20% before a bank would be threatened by a borrower walking away from a loan commitment. People with money, good credit, and a job who've purchased a home they can afford don't typically walk away from loans. Second, these sorts of homeowners can afford to hold their assets until the value returns. This keeps inventory (supply) low and prices generally stable.

Naturally, selling a home, even a second home, isn't always a planned event. People die, move, get a new job, upsize, downsize, and otherwise have life events that prompt a sale. This becomes the stock-and-trade of our inventory. But, few are distressed sales. Few are required to sell. And, if prices don't support their goals, they rent their properties.

I watched this very thing happen with the middle- to higher-end homes in San Francisco from 2008 through 2012. And by 2012, sales were robust. By 2014, the bull was raging again for just about everyone.

Here are three graphs with mark-ups that reflect the supply and demand that Palm Springs proper is experiencing:

This yellow graph reflects our current absorption rate. A market is considered "balanced" when we have six months of supply available. We currently have a month and a half.

This green graph shows how many homes are for sale in light green, the number of sold in darker green, and the red line shows number of homes that are pending. Pending is when there are no more contingencies (ways for a buyer to exit the purchase agreement without a penalty) to the contract. Notice that the red line is in ascent. This means more homes are going to close, and this number is greater than the 14 months shown.

This orange graph shows two important things. First, the number of days a property is on market is falling. Days on market includes both the marketing and escrow periods. (The escrow period is the time when the home is under contract to be purchased.) What's significant is that while fee land properties may settle in as few as 10 days when it is an all cash purchase, the typical length is 30 days. Leased land transactions always take longer, as there are a few additional layers of bureaucracy; I typically say 45 days. At 50 days on average, the marketing period is a week or two. And, almost like that freshly restocked toilet paper, the best homes are being snatched as they hit the market, unless there's so much activity that the Listing Agent needs a time to accept multiple offers and sort them out with the Seller. Second, the listing price to sales price is close to 100%. That means seller do have have to concede their asking price; they're in control of the deal.

With all of this said, if you're considering a move, let's talk real estate as it pertains to YOU.