A tale of two real estate markets in the Coachella Valley is emerging after an analysis of new housing data.

The number of entry-level homes - those priced under $500,000 - sold in 2007 is 24 percent less than 2006.

Meanwhile average prices dipped almost 4 percent.

That contrasts with the $1 million-plus market, which saw average sale prices rise nearly 2 percent from 2006 to 2007 and almost 9 percent since 2005.

And though sales dipped 18 percent last year vs. 2006, that was far less severe than the drops in other price ranges.

The analysis offers a clearer picture of how the market did last year and how it has struggled from the bottom-up since the second quarter of 2005.

"People are going to make decisions to buy in the desert more on lifestyle wants than on life needs," said Patrick Veling, founder and president of Real Data Strategies, a Brea consultant company that compiled the 2007 data.

The new figures will be released by the California Desert Association of Realtors this week.
In it, analysts have divided the market into four categories:

• Entry-level homes, which are priced under $500,000.
• Move-up homes, ranging from $500,000 to $749,999.
• Upscale homes, from $750,000 to $999,999.
• Luxury homes, which are priced above $1 million.

While average prices in the two middle markets have essentially stayed flat from 2005 through 2007, officials say the most intriguing trends are happening in the lowest and highest price ranges.

This new analysis helps agents, brokers and other industry professionals adjust and better react to the current slump, experts say.

Clients buying and selling in the higher ranges are dealing with their second or third home.

They don't have to sell if they don't think the price is right, says Bruce Blomgren of Dyson & Dyson Sotheby's International Realty in Indian Wells. He handles a lot of high-end properties.
"If they don't think the market will bring them what they think they should get for their home, a lot of sellers are willing to hold off."

Two homes in the $8 million to $10 million range were recently sold at Bighorn in Palm Desert, Blomgren said.

"There's plenty of volume and plenty of real estate activity," he said. "It just doesn't compare to 2004-05 where the market was in the frenzy."

Buyers looking at homes under-$500,000 range have very different motivations and economic realities.

In recent years, experts say this segment boomed when buyers were lured into the market by sub-prime lending and exotic financing deals.

Those have gone by the wayside. And prices for entry-level homes are now "out of whack" with the income of those buyers, says Chapman University economic researcher Esmael Adibi.

"The potential buyers are absent in that market," Adibi said. "Because of less demand and more supply, the prices are under pressure."

Sales statewide are likely to drop another 6 percent in 2008, according to predictions from the California Association of Realtors.

And the state's median price is expected to drop for the first time since 1996, declining as much as 5.5 percent.

Experts say sales prices in the Coachella Valley will inevitably drop from the pressure of all the homes on the market.

As of January, 9,134 homes - plus some foreclosures - were up for sale.

At best, experts say, the desert market could stabilize by the end of 2008. Most say a more realistic timetable for an upswing is 2009 to 2010.

"It will get better," said Greg Berkemer, executive vice president of the California Desert Association of Realtors.

"But just waiting for that to happen is not where you want to be. It's always a good time to buy real estate - just not for the same people."