The US economy remains robust. Perceptions, though, and actions by the Federal Reserve to curb inflation, have changed the previously prevailing winds of both national and local housing markets. Make no mistake; in the Coachella Valley and Palm Springs specifically, we remain in a decidedly "seller's market" as defined by the available inventory. (We have about three months worth; more than six months of inventory is considered a "buyer's market.")
Instead of unbridled enthusiasm on the part of sometimes desperate homebuyers, we are seeing price adjustments, longer days on market, and fewer offers.
Sellers get to set the price of their home. Those that listen to their agent when deciding on a number, assuming their agent is worth their salt, will start at fair-market value that's based on recent comparable sales. Over the last eight months, those asking prices were often less than what the market (buyers) delivered. As that pattern repeated itself, sellers started pricing above the comparable sales, and they still received multiple offers! (Sidebar, "over-pricing" in a wild market is a strategy to throttle the number of offers. That may sound odd, but each offer requires appropriate handling. Inviting 25 offers because a property is incorrectly priced too low and that creates a large burden on the listing agent and the seller.)
Some sellers (and their agents) are still stuck in that space of pricing higher than the available comparable properties.
Sellers will often say, "let's start higher because we can always lower it." That's generally a terrible idea for reasons I've addressed in another blog post and will likely revisit.
That's where we are with many, many, many of the current price reductions. Sellers have started where they thought (hoped?) the market was going, not where it is right now.
Framed differently, I'm seeing very few price adjustments where the property pricing started based on a direct comparable sale relative to value.
For example, within a condo development, say you have two homes for sale. One is a lower unit that faces a busy street. The other is an upper unit with a mountain view. Both are priced the same using an interior upper unit without a view that recently sold.
The upper unit is allowing the market (buyers) to see the added value of their unit with a view when compared to the upper unit that sold.
The lower unit in an inferior location is pricing for where they expected the market to go.
If both units sit, it's the lower unit that will take a price reduction. All other things being equal, the upper unit will sell because there are still many buyers eager to find a home.
Consider that a vast number of homes are still selling over the asking price; we are not in a downward trending market.
I explain to my listing clients that I make the marketing, not the market. Professional photos, compelling advertising copy, social media exposure, open houses, email campaigns, postcards, and private appointments are all within my control. I'm consistent with my approach on every single listing so that I know I've done my best.
We then review the data and focus it through the lens of my experience to arrive at a sensible, justifiable asking price. I have also had to explain to a seller that a price reduction is appropriate. But, based on how I market, I know it's not because I've overlooked or ignored presenting the value of the property to the buying public.
DAYS ON MARKET
Days on market is the time a property starts on the MLS until it is under contract. They've increased, but it's important to look at this in context.
Combined with seasonal variations, this is not an indiction that our local Palm Springs real estate market is in trouble. We're still at historic inventory lows.
I'm on our office Agent Leadership Council, as well as a weekly national master mind Zoom with outstanding Keller Williams agents all over the United States. Consistently, and this bears out in my practice, we're seeing fewer offers. Fewer offers does not mean no offers. Rather, instead of seeing sometimes as many as 25 contracts on a single property, we're seeing two or three.
Two or three offers is extraordinary good fortune for a seller. It gives them options and the ability to negotiate better terms. Plus, and this happened during the market boom, competition kicks-in for some buyers and the stakes go higher.
And to my point regarding days on market, enough properties are seeing multiple offers so as to keep this number so low
Our market remains robust, more so for property below two million dollars. We've always had a break point where luxury properties took longer to sell. This is no different.
Will there continue to be downward pressure of prices? Maybe. The Federal Reserve is taking extraordinary steps to curb inflation. The unemployment rate will increase. Home interest rates will likely settle between 6 and 7%, which are very, very good numbers for our economy.
For buyers and sellers ready to make a move, this is as good a time as any. Sellers may have missed a few frothy thousand dollars by waiting, but the odds are very good you still have a considerable amount of equity. And for buyers, the continue to be great opportunities for your new life in our beautiful desert. If you can afford it, now's the time to begin your search.
As always, contact me to discuss your real estate future, regardless of where you are in the United States. My strong referral network enables me to introduce you to excellent REALTORS® in your hometown.
(760) 325-1900 or use the "Book Online" tab to schedule time to meet!