Signs of Strength in the Slow Season

Vic McDonald Market Watch


At the end of August, eight of the nine Coachella Valley cities had positive year-over-year price returns, while only one, Rancho Mirage, had lower returns. Those numbers indicate steady improvement. In July, two cities had negative year-over-year returns, compared to four cities in June. What we find particularly encouraging is that these positive shifts are occurring during the weakest seasonal price months: July and August.

The City of Coachella continues to have the best year-over-year return, 22 percent, followed by Indian Wells and Desert Hot Springs. We also see that  La Quinta has finally moved positive after suffering from price weakness last year. All the cities are still considerably below their 2006 prices except Palm Springs, which is now only 15 percent shy of its peak. This state of affairs should not cause any alarm since current prices are on very solid footing.



Total valley sales, which slowly began to decline at the end of 2012, have been stable at an average of 700 units a month for over a year. In fact, sales have started to slowly increase. This increase is measurable on both the three- and 12-month average of sales. A year ago last August, the 12-month average sales number was 683 units; it is currently 702. The seasonal three-month average of sales was 701 a year ago. Now it’s 728.

This slow increase in average sales for the entire valley doesn’t apply to all nine cities. Six cities have higher sales than a year ago, while three have lower. The most significant sales increases are 14 percent in Indio and 12 percent in Palm Springs.



On Sept. 1, inventory stood at 3,619 units, 685 units higher than Sept. 1, 2014. The seasonal nature of valley inventory is very visible in the graph. When we study the last five years, we find September was the low point in inventory in four of those years. The other low point was August. We think this seasonal pattern will continue. The result will be a rise in inventory and it will probably reach a peak in January or February.

Since inventory is higher than a year ago, we expect “months of sales” (inventory divided by the sales rate) to also be higher. However, the slight increase in sales over the year has moderated the rise. As of September 1, months of sales was 5.2 months. Historically, such a ratio at 5.2 months is usually a sign of a market in balance. This is a situation in which neither buyers nor sellers have an advantage.

“Days on the market,” or the median number of days it takes to sell a home over the last three months, is now at 95 days. While DOM has been slowly rising for a year, this current number is still acceptable.

Vic Cooper and Mike McDonald are partners in Market Watch LLC, a nationally recognized real estate advisory firm that publishes The Desert Housing Report.


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