We would like to take this opportunity to keep you up to date on the real estate market here in the Coachella Valley desert communities of Southern California. As you probably know, the real estate market is actually a lot of very unique markets all rolled up into one. Just as one national weather forecast does little to predict what the day will be like outside your front door, a national real estate forecast does little to predict what the market is like here in the desert.
What gets reported, generally, pertains to single family homes that are typically primary residences. Most of the homes in the Coachella Valley are second homes or investment properties. We make this differentiation for the following discussion.
Each unique real estate market is made up of the supply of owners who want to sell and the demand of buyers who want to buy. As the sales prices of the homes for sale decrease, the demand from the buyers tends to increase. There is a secondary force at play here, which is the financing of those homes. Even when the buyer and seller agree on a price, the buyer needs to obtain financing in order to complete the transaction. If the buyer cannot obtain the required financing, the deal will fall through. As buyers fall away because of a lack of financing, foreclosures and short sales increase and prices continue to decline.
This brings us to a very important point: The financing side of the real estate market is generally a national market, very unlike the unique neighborhood market of buyers and sellers. Regardless of the area, financing becomes harder to obtain. This in essence, decreases the demand of buyers.
All of this is to explain the differences between our local real estate market and the much more typical real estate markets found around the country. First, many of the markets here in the desert are not single family primary residences. Instead, they are for the most part, second homes, located in gated, country club communities. As a result, although sales prices in many areas have dropped by nearly 25%, there are very few foreclosures and short sales. Most importantly, most of the buyers of these second homes either pay cash or have a large enough down payment that obtaining financing is not a problem. This, for all intents and purposes, eliminates the biggest obstacle and problem in the housing market.
This is to show that the fundamentals are in place for a strong rebound in the country club communities here in the desert. The sellers are selling for reduced prices and the buyers are here looking and buying.
The only factor that is weighing on the buyers is a psychological one. They hear all of the negative news on TV and the internet, which is true in many areas of the country. We have such a unique market in the desert that most of the issues bringing down the “national market” are not in play here. Never the less, the resulting psychology is very powerful.
We have been working with some very shrewd buyers who recognize the underlying fundamentals and are picking up some very good deals. For our Canadian buyers, they have the increased incentive of a weak US dollar as compared to the Canadian dollar. As the US dollar strengthens, this incentive will be reduced.
The purpose of this email is to educate you on our market and let you know that the buyers who recognize the early stages of a fundamental recovery typically get the best deals. We believe we are currently in the early stages of the fundamental recovery in our market.
If you would like more information or would like to see a sampling of these great deals, give us a call or shoot us an email. We look forward to helping you find just the right place for you!