The valley's recent real estate boom - and the current correction in sales counts and appreciation rates - have done more than alter buyers' and sellers' expectations. They've also got the experts wondering what "normal" should be these days.
"It's been so long since we've seen a normal market, we've forgotten what it looks like," said Pat Veling, real estate analyst and president of the Brea-based consulting firm Real Data Strategies.
Veling was among real estate and business experts who attended the 7th annual "State of Real Estate in the Coachella Valley" symposium Tuesday morning at the Doral Palm Springs Resort in Cathedral City.
The event was sponsored by the California Desert Association of Realtors in conjunction with other businesses, including The Desert Sun.
A downturn in home sales, soaring home inventory and a slowing of home price appreciation, which may drop to between 2 percent and 4 percent by 2007, should be expected after the frenetic and unsustainable pace of the past few years during which time price appreciation reached 25 percent, panelists told a group of about 400 attendees.
That anticipated dip in annual home price appreciation is doubly disheartening considering it had been as high as 37 percent in 2004.
Veling likened the Coachella Valley's real estate market to the familiar yucca plant: It's "evergreen and tough," Veling said.
Bill Powers, president of Pacific Western Bank, was another one of five panelists tasked with sizing up and forecasting what's ahead for the desert's real estate market. Powers believes there's been a lot of negative hype.
"Really, my message is, 'No hard hat necessary. The sky is not falling,' " Powers said.
As reported Tuesday at thedesertsun.com, the forum dubbed "I Survived 2007: How to Make It Through Next Year," was an effort to give those in the industry insight about everything from the rate of home price appreciation to the status of so-called "exotic" mortgages.
"There's an informational component for those of us who've been in the market a long time and are trying to get a feel for what's going on," said Fred Bell, moderator of a panel discussion and executive director of the Desert Chapter of the Building Industry Association.
During the event, real estate veterans touched on some key indicators that show just how much the valley's real estate market has changed in a relatively short time.
About 11,700 homes sold in 2005 across the valley, but only about 7,200 have sold so far this year.
More than 8,200 homes were listed for sale in the valley this week, compared with 4,700 during the same period last year.
As median home prices have tripled from $119,000 to $380,000 over the past decade, only 15 percent of valley workers are able to afford a median-priced home.
"The prices are out of whack still, and until they are adjusted it's going to be pretty slow," Powers said.
Robert Perryman, president of homebuilder Ashbrook Communities' Desert Division, said escalating land prices and rising construction costs are among factors pushing home prices out of reach of first-time buyers this year.
But Veling said 2006 has brought "no popping (housing) bubble," as some prognosticators had feared, but rather "a slow hiss," as sales activity has declined in the valley but overall sales prices continue to edge upwards.
Veling believes the valley's market is "well-poised to have a balanced repositioning."
Leslie Appleton-Young, vice president and chief economist for the California Association of Realtors, didn't attend the event, but she said across the Coachella Valley and beyond, the real estate market in 2006 was characterized by a gap between buyer and seller expectations.
Sellers sensed that the peak of the market was approaching, yet they still hoped to obtain the highest possible prices. Conversely, as the number of homes on the market grew, buyers took longer to identify and purchase a home.
Veling said many buyers are simply confused, so real estate brokers need to help manage sellers' expectations and help them make sense of the trends.
Real estate agents said buyers need to know that valley market fundamentals remain solid and that home values will continue to appreciate.
Other economic factors bode well for the valley real estate market, panelists said, from low unemployment and historically low mortgage rates to steady growth in the area's population.
"Statistics show that things are actually pretty good," said panelist Ernest Vincent, vice president of developer Palm Springs Modern Homes. "We're not facing 1990 all over again."
Did you know?
Ten fast facts about Coachella Valley’s housing market:
- Overall home price appreciation rates that have hit recent highs of 22 percent to 25 percent annually are expected to fall to 5-7 percent annualized this year and 2-4 percent in 2007.
- Blogs such as housingpanic.blogspot.com are helping to confuse buyers about everything from rumors to “bubble” theories.
- There are too many real estate agents chasing too few transactions, and most have yet to see a truly challenging market.
- Some discretionary sellers are taking their homes off the market and delaying their plans to move until they can get their price.
- Median home prices, both resale and new, jumped from $170,000 in 2000 to a projected $380,000 this year.
- Although single-family median home prices in the Coachella Valley were $390,000 in the second quarter of 2006, they were $576,300 in Los Angeles and $751,900 in San Francisco.
- Coachella Valley’s “affordability index,” while low at 15 percent, far exceeds areas such as Orange County with a 2.5 percent rate and Los Angeles with a 1.9 percent rate.
- Median incomes in the valley increased from $40,962 in 2000 to $50,178 in 2006, as median home prices jumped from $170,000 to $380,000 during the same period.
- Population growth in the valley, projected to jump from 318,125 in 2000 to 607,800 in 2020, is expected to continue to fuel real estate growth.
- Coachella Valley’s unemployment rate was 4.7 percent in August 2006, down from 5.8 percent in 2003.
Sources: Real Data Strategies Inc., Data Quick Information Systems, Federal Housing Finance Board, Desert Area Multiple Listing Service.
What they said
“There’s a 6-7 month supply (of homes) in the desert area. … The entire Southern California marketplace is dealing with a very manageable inventory, we’ve just forgotten what a normal market looks like.”
Patrick Veling
president of Real Data Strategies
“Right now we’re in a contraction period. Each time we come out stronger than before.”
Douglas Balog
Realtor with Keller Williams Realty
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