The low-slung Normand House in Palm Springs has the classic flat roof and magical back yard.
PHOTOGRAPH BY DAN CHAVKIN
If you’ve noticed unfamiliar neighbors walking around your community lately, you’re not alone. They’re among a stunning influx of new homeowners in the Coachella Valley pushing the real estate market beyond its capacity. Usually, when the economy tanks, as it has during the COVID-19 pandemic, the housing market sinks with it. However, with the ability to work remotely, many folks have been fleeing dense and depressed cities around the United States and landing in places like the Coachella Valley — open, spacious, and active.
Basic economic principles will tell you the increasing demand for homes pressures and shrinks the supply, driving up prices and triggering bidding wars. The frenzy has created an unprecedented environment in the desert communities not only for buyers and sellers, but also for the agents, brokers, and lenders scrambling to keep pace.
“Detached [single-family] home prices have been surging all year,” says Mike McDonald of the real estate research firm Market Watch LLC. “The median price [at the end of 2020] was $520,000, up 22 percent from the previous year. No one expected this, especially during a pandemic, but it happened.”
Indeed, unit sales across the Coachella Valley rose 13 percent to 1,277, and total sales in dollars jumped 31 percent to a record-setting $6.5 billion.
“The sales increase was mainly in the higher-priced luxury communities,” McDonald says, noting that spikes occurred in homes starting at $600,000. “Houses priced between $1 million and $2 million were up 62 percent. The largest gain was in La Quinta, followed by Palm Springs, Rancho Mirage, and Palm Desert. The increase was in single-family residences [18 percent], not attached homes [3 percent].”
And, if you believe McDonald, the surge has only just begun. Although the pace steadied early this year, he predicts would-be sellers who had “COVID listing reluctance” at the height of the pandemic will flood the market with new listings — especially for lower-priced homes — as soon as this summer. (Sales under $300,000 actually fell 19 percent in 2020.)
ILLUSTRATION BY ADAM NICKEL
“When people are vaccinated and feel comfortable allowing people into their homes, listings will increase,” he recently told an audience of real estate professionals in his 2021 Market Watch Forecast webinar produced by Palm Springs Life. “If we’re right about that, it will open a fantastic opportunity because of the pent-up demand for new listings. Very seldom do we know an opportunity like this is coming. We think we know, and it’s very encouraging.”
Meanwhile, by the end of 2020, inventory throughout the Coachella Valley hit an all-time low — 1,507 units, down 50 percent since January 2019. New listings were down 8.8 percent across the valley, especially for lower-priced homes in Desert Hot Springs (down 29 percent), Coachella (24.3 percent), Cathedral City (16 percent), and Indio (12.1 percent).
“The valley’s new home market has been flat for 13 years,” McDonald says, noting new homes account for 10.9 percent of total sales, “and only four cities are actively participating.” Coachella leads the way at 46 percent of sales (316 homes), followed by Indio at 21.3 percent (1,840 homes), Cathedral City at 17.6 percent (1,008 homes), and Rancho Mirage at 15 percent (1,297 homes). “The communities behind these numbers include Escondida Pointe and Valencia in Coachella, two active adult projects in Indio, Verano in Cathedral City, and Del Webb in Rancho Mirage.”
PHOTOGRAPH BY DAN CHAVKIN
A midcentury modern villa in the Indian Canyons neighborhood in South Palm Springs.
With new home construction stymied by the pandemic, McDonald says it will not satisfy the valley’s inventory shortfall this year. “In our forecast,” McDonald says, “we looked at all the available lots, and we’ve come up with fewer new home sales than last year.”
Meanwhile, buyer demand has fueled double-digit percentage gains in the median price for detached homes, as well as bidding wars and waiting lists.
“Twenty-two percent of homes sold above the listing price,” McDonald says.
The most dramatic spike occurred in La Quinta, which was up 27.5 percent in 2020, finishing at $650,000. Next were Palm Springs at 22.9 percent (a record-high $822,500), Desert Hot Springs at 19.6 percent ($275,000), Cathedral City at 18.6 percent (a record-high $415,000), Indian Wells at 15.6 percent ($959,500), and Palm Desert at 15.1 percent ($500,000).
Condos saw their greatest gains in Indian Wells, La Quinta, and Rancho Mirage — all hovering around 20 percent above the previous year, with median prices ranging from $390,000 to $472,000. Cathedral City and Indio actually saw slight losses, with median prices dropping to about $195,000.
For this year, McDonald expects home prices to hold steady. “Even with the eventual surge in new listings," he says, “there are no signs yet of a housing bubble.”
Walter Neil of Franklin Loan Center, also participating in the 2021 Market Watch Forecast webinar, emphasized that now is a good time to buy, despite the rising prices. “Interest rates will remain very favorable,” he says, explaining buyers can still get a cheap mortgage, “and so is affordability when you think of [the purchase] as an investment. The high demand and tight supply point to 6 percent appreciation in 2021. So, yeah, you might pay over the list price, but based on the appreciation forecast, look at your value four or five years from now.”