The Coachella Valley is as popular as ever, with visitors from around the world convening in the desert to relax and enjoy our mild winter climate, surrounding natural beauty, cool lifestyle, and popular events. As the region’s popularity continues to point up, so too will its economic health, especially our real estate market. The 2018 real estate market in the Greater Palm Spring Area is projected to build upon the optimism and ascension we experienced in 2017.
Overall, indicators from the 2017 market showed positive growth, with the number of closed units, sales price, and average price per square foot making gains, while inventory and days on market declining. This combination demonstrates a healthy homes market that will carry-over into the new year and beyond. According to data supplied by the MLS, here is how the Coachella Valley real estate market compares year end 2017 to 2016:
Single Family, Detached Homes
- Unit Sales UP 8.4% (6,859 vs. 6,326 units sold)
- Average Closed Sale Price UP 6.2% ($518,500 vs. $488,200)
- Inventory DOWN 16.8% (2,620 vs. 3,148 units)
- Average Days on Market DOWN 11.1% (96 vs. 108)
- Sold vs. List Price UP 4% (96.4% vs. 96.0%)
- Average Price Per Square Foot UP 4.9% ($224.50 vs. $214.10)
Multi-Family, Attached Homes
- Unit Sales UP 21.8% (3,395 vs. 2,788 units sold)
- Average Closed Sale Price UP 4.0% ($265,100 vs. $254,800)
- Inventory DOWN 24.0% (1,179 vs. 1,552 units)
- Average Days on Market DOWN 9.7% (102 vs. 113)
- Sold vs. List Price UP 0.5% (95.8% vs. 95.3%)
- Average Price Per Square Foot UP 3.9% ($180.10 vs. $173.30)
Rosy outlook for 2018 aside, Bennion Deville Homes wanted to examine some general trends in the industry. Below are a few notable things to keep an eye on in 2018:
An Influx of Residents
With razor-thin inventory and rising home prices impacting affordability in the coastal markets, more full-time residents will make their way into the desert’s population. According to numbers released by the State of California, population growth in Riverside County is expected to increase 1.2% each year until 2022. With no end in sight to the housing crisis along the coast, however, that number could push higher as homebuyers seek affordable housing options in other parts of Southern California.
In addition to full time homeowners, the Southern California desert remains a top destination for part-time residents seeking a warmer climate during the chilly winter months from other parts of North America, and the world. The U.S. dollar’s strength compared to the Canadian dollar is back to a normal exchange rate level, making the prospect of purchasing a vacation residence more palatable and a better prospective investment for our Canadian buyers.
Growth in New Construction
According to Dodge Data and Analytics, new home construction starts are expected to increase 3% across the nation this year. Locally, we have seen several small and mid-sized projects open, and anticipate opening, across the valley in 2018. Huge master planned communities are on the horizon for Palm Springs and Indio, while projects in by Foxx Company, GHA Companies, and Family Development add much-needed new home options to the central communities of the valley. Overall, there is still a shortage of new housing to meet high demand, but this year more new inventory will hit the market than in past years, helping to bridge the gap.
The Impact of Tax Reform
The jury is still out on the potential impact of the tax bill passed in late December. Interest deductions can be counted for the first $750,000 borrowed for new mortgages, as compared to $1 Million under previous guidelines. However, many local real estate professionals cite the fact that most luxury home deals are paid in cash as a reason for optimism. In addition, the second home mortgage interest deduction survived the bill’s final cut, which should mitigate concerns for many part-time residents looking for a new home in the Greater Palm Springs Area.
In addition to changes to mortgage deduction limits, the new bill imposes a $10,000 cap for deductions to property, state, and local taxes. This may be the most impactful of the new rules, depending on taxed property values and personal finances. As a result, many rushed to pay future taxes prior to January 1 to avoid losing out on these deductions in 2018.
Overall, it is still too early to tell just how much of an impact these new measures will have on the real estate market. The initial analysis is that there may be some added caution by some prospective homebuyers, but overall the tax incentives to purchase a home still remain, most notably the mortgage interest deduction.