The Real Estate Corner Desert Market Update
NUMBER OF SALES
Home sales are up Valley-wide. The total three-month sales are up 2.9%. On a city by city basis, six cities show higher sales, with three; Palm Desert, Desert Hot Springs and Palm Springs showing the largest increase in sales.
The three cities with the largest sales declines are Indio, Indian Wells and Cathedral City.
INVENTORY OF HOMES FOR SALE
While home sales are up, inventories are down. Typically our inventories dip to to their lowest point every year toward the end of September, but this year inventories are even lower.
Low inventory acts as both a positive and negative; it’s positive for sellers and future home sellers as it tends to move home prices higher. But, it’s also a negative in that low inventory puts the brakes on the number of sales. If interest rates continue to increase, that can put a damper on sales as the cost of borrowing money for a mortgage becomes more expensive.
MONTHS SUPPLY OF HOMES FOR SALE BY CITY
The month’s of supply ratio is down valley-wide compared to one year ago in every city. Most have less than 4 month supply except two; La Quinta which currently has a 4.5 month supply and Indian Wells with a 6 month supply of homes to sell.
MONTHS SUPPLY OF HOMES FOR SALE BY PRICE BRACKETS
When we look at the supply of homes by price category, we see the supply is lower across all price brackets compared to one year ago. The biggest change is homes priced above $800,000. Last year the higher price points were taking 7.5 months – 1 year to sell. Now, it’s taking on average 5.3 – 8 months
The tipping point when using this metric is 6 month’s. 6 months is considered a “Balanced Market”, not particularly favoring either Home Buyers or Home Sellers. Less than 6 months, the market is tipped in the Sellers favor, otherwise known as a “Sellers Market”. More than 6 month supply is viewed as a “Buyers Market”.
As home prices or the cost of buying a home, (rising interest rates), increase – sales will start to slow putting downward pressure on pricing. Markets are always in a state of flux, moving from one market to another and rarely stopping at “balanced” for long.
While there is typically a lag period between market shifts, the lag time is shorter as the number of sales are increasing. Home sellers quickly see an improving market and strive to maximize the price they can ask. When prices increase too fast or too far ahead of sales, potential home buyer’s become reluctant to make offers, fearing they could be buying at the peak.
DISCOUNT FROM ASKING PRICE
In 2018, when negotiating a sale price with buyers; home sellers are discounting their listed price an average of 2%. One year ago, sellers needed to discount an average 2.4% off their asking price to close a sale.
For example, this ratio means if a home is listed at $400,000 it’s selling at an average of 98% of their asking price, or $392,000. a discount of $8,000. This metric also shows a strong and improving real estate market here in the Desert.
When we look at the story each of these metrics are showing for the Desert Real Estate Market, we can see an improving but pretty balanced market. In addition, we can see that the market has had and continues to show sustained growth. Making now the right time to be a participant in the market.
The Desert Lifestyle is unlike any other, as we head into our season now is a great time see what the Desert has to offer. Check out these FAB Desert Homes!
Summer Desert Market Report – Mediam home prices rose for the 8th straight month. Up 9.6% from last year. The hottest cities for sales by volume were Palm Desert (233), Palm Springs (213), La Quinta (156), Indio (131), Rancho Mirage (97). Each city and each community has its own story some communities have seen huge growth, while others are relatively flat. The cities that had the largest price increases, have seen the number of sales flatten, which tells us that prices were getting ahead of the market.
Inventories are down again putting upward pressure on pricing. Overall the desert has seen a decline in the time it’s taking to sell, nicely presented homes in a good location and priced well are selling quickly. Currently there is a 3 month supply of homes for sale in the desert, which puts us in a “Sellers Market” as we head into season.
The Fed has indicated there will likely be two more interest rate increases before the end of the year, which could start to weigh on the market and slow sales until the shock is absorbed.
Southern California and specifically, the Coachella Valley continues to be a sought after destination for a second home get a way.
As we head into our “Season”, we expect to see continued strong home sales and price appreciation valley-wide.
How’s your neighborhood doing? Send me an email, I’ve got the details!
What is a 1031 Exchange and can it work for you?
Thanks to IRC Section 1031, a properly structured 1031 exchange allows an investor to sell a property, to reinvest the proceeds in a new property, and to defer capital gain taxes.
1031 EXCHANGE FOR REAL ESTATE INVESTORS – THE BENEFITS
Whether an investor’s property is owned free and clear or encumbered, the benefits of a tax deferred exchange can be significant. The tax dollars saved by doing an exchange can be used to buy additional investment property.
An investor who exchanges is able to defer the capital gain tax and buy a replacement property worth more than the investor who simply sells and reinvests with after tax dollars.
1031 Exchange for real estate investors provides one of the best tax strategies for preserving the value of an investment portfolio. By using an exchange, the investor is able to defer the recognition of capital gain taxes that would otherwise be due with the sale of an investment property. To qualify as an exchange the relinquished and replacement properties must be qualified “like-kind” properties and the transaction must be structured as an exchange.
1031 EXCHANGE FOR REAL ESTATE INVESTORS – NON TAX BENEFITS
In addition to deferring the capital gain tax, tax deferred exchanges provide the investor with a wide range of non-tax opportunities that may suit an investor’s portfolio
- Reposition assets
- Change property types
- Increase leverage
- Increase depreciation deduction
- Reduce management obligations
- Provide for estate and retirement planning
- Allow for relocation
- Improve cash flow
- Achieve property consolidation or diversification
- Eliminate or create joint ownership
THE EXCHANGE PROCESS
Most exchanges, involve three parties: the investor, (exchanger), who is doing the exchange, the buyer who is buying the exchanger’s old (relinquished) property, and the seller who is selling the exchanger a new (replacement) property. To create the exchange of assets and to obtain the benefit of the “Safe Harbor” protections of the tax code, it is wise to employ an Exchange Accomodator, or Exchange Facilitator. This qualified intermediary becomes a fourth party principal in both simultaneous and delayed exchanges.
The steps for completing an exchange are relatively simple with qualified intermediary:
- The exchanger signs a contract to sell a relinquished property to the buyer.
- Exchanger enters into an exchange agreement with a Qualified Intermediary and assigns rights in the sale contract to the intermediary, including the right to receive the exchange funds.
- At the closing of the relinquished property, the exchange funds are wired to the intermediary and the intermediary instructs the settlement officer to transfer the deed directly from the exchanger to the buyer.
- The exchanger has a maximum of 180 days in the exchange period to acquire all replacement property.
- Unless the exchanger can acquire all replacement property within the first 45 days from the close of the relinquished property, the exchanger must identify possible replacement properties in writing to the intermediary within the 45 day identification period.
- The exchanger signs a contract to buy the replacement property with the seller and the exchanger assigns the exchanger’s rights in the purchase contract to the intermediary.
- At the closing of the replacement property, the intermediary wires the exchange funds to complete the exchange and the intermediary instructs the settlement officer to transfer the deed directly from the seller to the exchanger.
As a general rule of thumb, to avoid paying capital gain taxes in an exchange, the investor should always attempt to:
- Buy a property of equal or greater value, (net sales price).
- Reinvest all of the net equity in replacement property
- Obtain equal or greater debt on replacement property.
*Exceptions: A reduction in debt can be offset with additional cash from exchanger, but increasing debt cannot offset a reduction in exchange equity.
Do you own an investment property and thinking about selling it to buy another that might have more cash flow or less management headaches? We can help. Give me a call or send me an email, let’s talk about what’s possible for your situation.
Cathi and Ben Walter
(760) 218 – 5752
Ever wonder how much income you need to buy an average home in other areas of the country?
@HowMuch.net just published a map showing How much income you need to buy the average home in each state in the U.S.
They collected average home prices for every state from Zillow and then plugged that information into a mortgage calculator to figure out monthly payments. The interest rates used varied from 4 to 5% depending on the market, a 10% down payment, and total cost of housing not exceeding more than 30% of gross income. Using this rule as the benchmark, they calculated the minimum salary required to afford the average home in each state.
The Top Three Places Where You Need the Highest Salaries to Afford the Average Home 1. Hawaii: $153,520 for a house worth $610,000 2. Washington, DC: $138,440 for a house worth $549,000 3. California: $120,120 for a house worth $499,900 Here’s a quick snapshot of housing affordability across the United States.
Home much income do you need to buy the average home in each state; Check it out!
Home Design Trends for 2018 – Each year Fixr conducts a national survey of home industry influencers in the US; those who are building, designing, manufacturing and publishing content relevant to the field, revealing single family home design and construction trends.
Gen X’ers are the most likely group to buy a single family home with Millennials representing the second largest group in the 2018 Fixr Survey. There are many reports that show Millennials are driving the current market.
In 2018 more home buyers are looking for single story homes with more than 2,000 sq ft with an open floor plan and they want to live in urban areas.
Smart home features and automation are gaining traction at an incredible rate and is the number one choice for popular home design trends going forward.
Green and Energy Efficient Design is important to both Gen X and Millennials, but more so for the Millennials with Smart Thermostats, Home Automation Security, Lighting Control Systems, Smart Appliances.
Artificial intelligence and voice control systems will start showing up in homes in 2018.
The open floor plan has been the most popular layout since 2013 and will continue to grow going forward.
For current homeowners, when it comes to affordable upgrades, energy efficient upgrades and style enhancements were popular.
Dimmable lighting allows the homeowner to influence the mood of a room at all times of the day and night. Wireless hubs and concealed components are considered to be integral in nearly every home.
Adding energy efficient windows were another popular trend for homeowners.
Adding outdoor living spaces will be a popular addition in 2018 with more Millennials looking for indoor / outdoor living.
Home Buyers are beginning to expect both function and aesthetics, while function is the primary goal, aesthetics go a long way toward providing comfort and personal expression.
There is a delicate balancing act for home builders between homes that are aesthetically pleasing to the eye vs energy efficient homes that may feel cold or impersonal.
Most designers agree that form should always follow function and the most successful home design blends the two attributes creating a cohesive design, enhancing the homeowners experience in the space.
Get more information about what today’s home buyers are looking for before you put your home on the market. Give me a ring, I’m happy to share my knowledge and experience to help elevate your home above the competition (760) 218 – 5752.
What the Dodd-Frank Rollback Means for Real Estate
On May 22nd, Congress passed reforms to the Dodd-Frank Act, the massive financial reform bill enacted in July of 2010 in the wake of the 2008 US financial crisis.
The current bill could have a big impact on the real estate and mortgage lending. Economists believe the rollback of the Dodd-Frank regulations could lend a hand toward partially solving the industry’s inventory crisis.
“This is a win for the financial industry,” said Chief Economist Nela Richardson, who worked on the bill as an economist for the Commodity Futures Trading Commission. “These are community banks, credit unions, a lot of them are in rural areas. They do a lot of mortgage lending. This will help consumers in that the banks will be able to free up some credit.”
National Association of Realtors Chief Economist Lawrence Yun echoed Richardson, adding that a loosening of Dodd-Frank rules may lead to a rise in regional construction.
“The regulations placed on small-size community banks were terrible because it hindered small-sized homebuilders from obtaining construction loans,” he said. “As the homebuilding industry has become more dominated by large corporations, now we have this relief, which means that, small-time homebuilders will have better access to capital to build homes.”
Economists seem to agree, that the economy is not on track to repeat the financial crisis of 2008, since big banks were at the center of the collapse a decade ago. Richardson explained that the only way to eliminate all risk is to make everything as onerous as possible.
The legislation will also require Fannie Mae and Freddie Mac to consider the use of alternative credit scoring models, which could help borrowers with thin credit files receive a mortgage. But Gardner said he’s concerned, ultimately, we need to remain aware of looser credit restrictions so the country does not repeat the acts of the last financial crisis, where homeowners were given loans they could not pay back.
February 16 – 25, 2018 The 72nd annual Riverside County and National Date Festival 2018 opens for 10 amazing days of fun for all at the Riverside County Fair Grounds in Indio.
The 72nd annual Fair and Date Festival is about to light up the Desert and packed with fun for everyone including Camel and Ostrich Races, Carnival Rides, Arabian Nights Music Festival, Parade, Pageant and live concerts with star-studded headliners
Friday, February 16th at 7:30 p.m.
Saturday, February 17 at 7:30 p.m.
Los Rieleros del Norte
Sunday, February 18th at 7:30 p.m.
Lou Gramm, founding member of Foreigner, with Foghat
Saturday, February 24th at 7:00 p.m.
Super Fiesta Sunday featuring
Los Tequileros de Ramon Jimenez, Banda Pachuco, and Carmen Jara
Sunday, February 25th at 3:00 p.m.
After the Fair, stop by to see these exceptional homes
Want more information about one of these exceptional homes?
Give us a ring, (760) 218 – 5752
2018 Home Design Trends –
What to Ditch and What to Look for
OUT – Chevron Patterns and Gray
Time to ditch the Chevron pattern that we’ve seen everywhere from wallpaper to lampshades. Muted gray and white is on the way out, making way for color.
IN – Color
Warm rich color is making its way onto walls, moldings, and furniture in a big way. Peacock Blues and Greens, Burnt Orange, and even pops of “Gen Z Yellow”
OUT – White Kitchens and Large Range Hoods
All white Kitchens are still popular, however, black, two tone cabinets, and wood tone cabinets are the trend for 2018 with Quartz counters.
IN – Warm Woods and Integrated Range Hoods
OUT – White on White Everything
Monochromatic white on white interiors are giving way to more realistic lifestyles that include kids and dogs. Look for rich warm colors to show up in 2018.
IN – Warm Color
OUT – Farmhouse Style
The Farmhouse look has been in style for about 4 years. 2018 Style trends are moving toward minimal design.
IN – Warm and Minimal
Don’t miss the 32nd annual Southwest Arts Festival in Indio, hosted at the Empire Polo Grounds. This year’s festival will feature interactive art displays and live music, with pottery, glass and fine art painting. Enjoy the art surrounded by the natural beauty of the Santa Rosa Mountains with a variety of food and beverage options as you casually stroll the grounds. This is an internationally recognized cultural event featuring traditional, contemporary and abstract fine works of art by nearly 250 acclaimed artists from around the world.
After enjoying the Southwest Arts Festival, stop by to see this great home in Estacio!
You just found the Luxury Lifestyle you’ve been looking for in the sought after Gated Community of Estacio with low HOA’s. Welcome to Via Carisma! This exceptional home features over 2,300 Sq Ft with 4 Bedrooms including separate Guest House. Invite your Friends & Family, this home is designed for Entertaining with a free flow from inside to outdoor living with Lush Landscape & Spool with jets & Baja Tanning Shelf. This is a Great Room Floor-plan with Volume Ceilings, Architectural Detail, Fireplace & Chef’s Kitchen with Gas Cook-top, Dual Ovens, Breakfast Nook & Opens to Living & Dining. There are 3 bedrooms in the main house including a Luxury Master Suite that opens to the Backyard with Spool for an Evening Dip, plus large Guest House. Unique to this home is a new 5 Ton Lennox Signature AC system with computer controlled Variable speed. Enjoy an easy Lifestyle here, close to World Class Golf & Tennis, Hiking, Old Town La Quinta and El Paseo for Shopping, Dining, and Entertainment.
For Open House Dates and Times call us directly at (760) 218 – 5752 or email Cathi@DesertAreaHomeFinder.com
Home Buying Mistakes You Can Avoid
Home buying is an emotional process. Ideally, you should set aside your emotions when you’re evaluating a house. But in practice, keeping your emotions in check can be difficult at best.
Make a list of items to check:
One way to help make it easier is to sit down before looking and make a list of your
- Must Have’s – Your non-negotiables. You swim every morning, you need a pool.
- Nice to Have’s – it would be nice if you could have it, but not a deal breaker. A sink in the laundry room.
- Deal Breaker’s – A definite non-starter. The house backs to a busy street.
Take a copy of your checklist every time you visit a house. Take photos so you can cross each item off your list. If you fall in love with a house and it doesn’t have any of the Must Haves on your checklist it will at least make you pause and think.
Learn about the Neighborhood
If you’re retired and buying in a neighborhood with small children, school buses, and basketball hoops, will you be happy there?
Buying the View
Unless the land between the house and the view is already completely developed, or you will own the land between your house and the view, don’t buy a house for the view across a piece of vacant land that you do not own. There are too many unknowns that can make you regret your purchase. A new development with 2 story homes could be built in the future between you and the view. What if the land is rezoned commercial and a shopping center goes in? In either case, you’ve lost your view and the view premium you paid when you bought will no longer apply when you go to sell.
Look beyond Staging
Staging psychology does work. Staged houses look far better than houses that have not been staged. When considering a house, try to mentally remove the staging. Example; a room is beautifully staged with a sectional in the middle of the living room with end tables and lamps on each side. But there aren’t any electrical outlets where the lamps are! It would take a significant remodel to make that layout work. Pay more attention to the layout of the house and the structure itself. Ugly wallpaper and paint can easily be fixed later.
When you’ve narrowed your choices down to one property for consideration. Take a few minutes to chat with the neighbors, ask them about the neighborhood and the house, they’ll let you know if there are any problems you should be aware of – neighbors love to talk. What they say can cement your decision that this is the perfect home for you or it could save you from making a mistake.
Talk to the current Gardner and Pool Service; they can shed light on the condition of equipment and if there are any problems that may need to be fixed soon.
There are many things to consider when looking for the right home to buy; if you’re starting out on the journey to find the right home for you and your family, you’ll want to read our Guide to Home Buying, how to avoid common home buying mistakes.