Despite all the negative press, the real estate market in the Coachella Valley in 2006 has been positive overall and has recently showed some very encouraging signs! The market is returning to a more normal, healthy market, as compared to the aggressive appreciation gains we’ve seen in the past 24 months. From late 2003 through 2005, the nation experienced record low mortgage rates that lead to a surging “seller’s market”. That red hot market could not last forever, and we are welcoming this new change — it is good for us all!

With interest rates starting to rise in 2005, the “seller’s market” rose to a fever pitch with buyers fighting to take advantage of the favorable mortgage rates (often below 5%!). As the rates rose, the buyers have relaxed and the “seller’s market” started to fade. By mid-2006, some of this urgency had left which was spurred by the thought that rates were climbing and prices were going down. This past summer we saw sellers start lowering their prices to attract the buyers who, just a few months earlier were clamoring at their doorsteps. As the “seller’s market” faded and inventories rose, the buyers, faced with more choices, started to sit back and wait. The industry slowed down and the national newspapers presented stories of bursting bubbles. Although the average home price in La Quinta only dropped 2.7% (Average sale price January - August as reported by Dataquick Information Services) as compared to last year, other parts of the country like the Detroit area, were hit very hard. Our local newspapers reported a gloomy future for us locally based on these national statistics, which were often irrelevant to the local marketplace here in our desert. Even though buyers were coming to the valley, they seemed to adopt a wait and see attitude assuming the prices would continue to come down. As with a typical changing marketplace, and because of our hot summer months, real estate sales slowed.

However, during the same period, the nation’s economy began to heat up and economic indicators started turning positive as interest rates began to fall. Now, mortgage rates are continuing to drop (you can get a 30 year fixed mortgage - with 10 year I/O - below 6% today!), and we are seeing more buyers returning to our market ready to purchase the home of their dreams. Many of these buyers have been waiting on the sidelines all summer and don’t want to wait any longer. They also realize that today’s market presents a great buying opportunity.

In the years previous to the hot seller’s market, about 10% of the homes in any gated community were typically available for sale. The Citrus, a gated club in La Quinta has about 550 homes and in 2001-2003, about 55 were available for sale. During the 2004-2005 sellers market, that number was down to a low of 9. Today, there are 36 listings: a 400% increase in inventory over 2004-2005 but only 65% of a “normal inventory”. The bubble is not bursting — the market is just changing. Now is still a great time to buy or sell a house!

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