Predictions for An Unpredictable 2022 Desert Real Estate Market
Bennion Deville Homes does its best to predict the perfectly unpredictable market for 2022.
After unprecedented highs and lows over the last couple of years, the Coachella Valley market could be in for more shifting in 2022.

Over the last two years, the Coachella Valley real estate market has experienced unprecedented highs and lows. At the outset of the pandemic in 2020, the real estate industry was rocked with uncertainty as we waited for how the economy would react, and the direction of the markets. As it turns out, our desert was in prime position to thrive during this period. With loosening restrictions from companies about working from home, especially tech hubs in Northern and Southern California, many remote workers clocked into the office poolside via laptops and cell phones. Our desert’s positioning in Southern California hits a sweet spot. We are at most a couple hours’ drive to major destinations and POIs around the region, and sparsely populated enough to offer safety when compared to more densely populated areas. With changing patterns of migration and the exodus from large cities and crowded suburbs, our desert real estate market, along with many other resort towns, surged in popularity. This put the market into overdrive, causing historic shifts in inventory and pricing, all led by increased demand and an all-time low cost to borrow money.

The Coachella Valley real estate market surged from June of 2020 through most of 2021, only returning to something that resembles a normal market shape in the 4th quarter. Riding that trend wave into 2022, there is still much uncertainty in how the market will fare. By examining the trend lines and looking at the key variables that impact pricing and demand, we will do our best to offer some predictions for 2022. If the previous two years have taught us anything, however, it is to anticipate the unexpected.

Inventory Will Loosen

Check out the Bennion Deville Homes Coachella Valley market recap to catch up on the latest trends affecting the desert market.
Home inventory around the desert is expected to loosen for a variety of reasons.

One of the key factors in the local and national price surge has been a historically low number of homes available for sale. For most of 2021, the desert housing inventory level hung at or below a 1-month supply of homes, which is calculated by dividing the number of homes for sale by the number of homes sold. To reinforce how deficient that figure is, a balanced market offers a 6-month supply of homes. Several factors have created shrinking inventory levels, but there is sentiment that more homes will start to hit the market again now that the holidays are behind us. With a quieter, more “normal” 4th quarter, which includes the traditionally slower holiday season, we could see those prospective home sellers start to act on their desire to put a property on the market. Additionally, projected increases to interest rates could have some savvy sellers listing their homes earlier in the year to take advantage of a larger buyer pool before the cost to borrow money increases. For the first time in a couple of years, the Coachella Valley has its seasonal residents back as well. Perhaps there are current out-of-area homeowners who wanted to spend one last holiday season in the desert before cashing out.

The Buyer Frenzy Will Fizzle but Demand Will Stay Strong

The demand for homes will remain very high for homes across the Coachella Valley, but the frenzied market of 2020 and 2021 will not return.
The homebuying frenzy will dissipate in 2022, but demand will remain strong for homes across the Coachella Valley.

At the peak of the desert’s pandemic-era market, newly listed homes would disappear in a matter of hours. To many, it seemed like the instant a home went active in the MLS a flood of offers would come in, mostly at or over asking price. The combination of low interest rates, falling inventory, and strong demand fed this frenzied scramble for listings. As more options hit the market, there will be more homes to go to buyers in the market to purchase property. Additionally, with interest rates projected to increase next year, buyers who need to take out a mortgage to purchase their home will have less buying power, potentially pricing them out of some residences and possibly taming aggression during the bidding process. However, demand for the desert lifestyle remains strong. When examining the rising cost of living in our coastal markets of Southern California mixed with the world-class amenities, beautiful weather, and slower pace of life, the Coachella Valley is a fantastic value for homebuyers and will remain in high demand in 2022 and beyond.

Prices Will Go Up – Modestly

We will see rising home prices, but at levels closer to historical norms below double-digits.
Home prices will continue to rise, but at more modest levels due to a variety of factors.

If our prediction of expanding availability of inventory comes true, then simple economics of supply and demand deem that prices are due for a correction. But how big of a correction is in store? Home prices have been steadily increasing for years, with exceptional price growth occurring over the last 18 months as extreme market conditions severely impacted the cost of existing homes. Our predicted dominant trends of growing inventory levels and rising interest rates would keep price growth at more modest levels. Instead of the double-digit percentage increases of the past two years (15% and 20%, respectively), prices will grow at a slower rate. The National Association of REALTORS® forecasts 5.7% price growth for 2022 nationally, accounting for slowing inflation and increases to interest rates putting a damper on prices. In the years leading up to 2020, the highest annual price increase came in 2018 when prices went up 8.3% from the prior year. Factoring in a recent “typical” year of price increases, along with the downward trend of price growth toward the end of 2021, we predict prices will again increase but at a figure that is closer in line with the years leading up to 2020 and not at or above 10%.

It Will Be A Good Time To Sell – And to Buy

Enjoy these exciting events throughout the Coachella Valley and Southern California this month.
It will be a good time to buy or sell in the desert in 2022, thanks to a potential market shift making it an attractive time for both home seekers and for sellers.

This prediction seems like a cop-out, and maybe it is. However, with more inventory becoming available, those who have been searching for a property will have additional options in a market that has lacked choices for some time. Interest rates, although increasing, will remain reasonable, preserving buying power and carrying your dollars far. It will be the best market for buyers since February of 2020.

For sellers, there has never been a better time to list. The desert is incredibly popular, and with the excitement and buzz surrounding the return of music festivals, more year-round amenities to enjoy, and the increasing costs to other Southern California markets to the west, the desert is one of the last truly affordable places to live in the region. For those sellers who purchased at or toward the bottom of the market, the time is now to cash in on any equity you may have built over the last several years, especially if your desert property is an investment property or vacation home.

Whether you are looking to buy or sell in 2022, or simply want to know your options, we hope that you choose to make a Bennion Deville Homes real estate professional a part of your process. We will unlock possibilities for you.

2 Comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.