- What’s Causing Shifts in the Palm Springs, CA Housing Market?
- Buyer and Seller Activity
- The Typical Buyer/Seller
- Is it a good time to buy/sell?
- We’ve Passed the Peak
- Interest Rates Impact Housing Affordability
- The Future of Palm Springs, CA Housing
- Real Estate Agents are Here to Support You!
What’s Happening in the Palm Springs Housing Market?
As a real estate broker in Palm Springs, California, part of my job is to oversee transactions and analyze data. Over 500 agents are a part of my brokerage, so I have access to numerous data points. This gives me great insight into the current Palm Springs housing market at any point in time. Generally, I can understand where the local market has been, where it currently stands, and where it may be headed in the near future. With this insight, I can spot trends and make predictions accordingly. I use this information to help set expectations for the agents I lead, and their clients. It is also used to create material for training courses and workshops. Here, I’ll break down some of the market trends I’m seeing in Palm Springs right now and share some of my predictions for real estate’s future.
What’s Causing Shifts in the Palm Springs, CA Housing Market?
To tell the story of what’s going on in my local market, I compare the number of new listings to the number of listings under contract. I keep track of the daily numbers and analyze how these numbers change on a daily, weekly, and monthly basis.
Recently, the market has shifted, and the shift has happened fast. The swift rise in interest rates from 2021 lows of under 3.0% to the current rates hovering around 7.0% has created a dual issue: Fewer buyers who hold the motivation necessary to see a sale through to the closing. And sellers who would like to move, maybe a pool would be nice, or a three-car garage would be convenient – are staying put because selling to take on a new loan at double the interest rate simply does not make sense in most cases.
Buyer and Seller Activity
Although the number of home sales are down 8% year over year, the Palm Springs housing market remains active.
The median price for homes remains higher than last year, bolstered by strong buyer demand and limited inventory. According to Redfin, the median sale price has increased by 11.4%, with a median home value of $729K. In addition, the price per square foot in Palm Springs is $449, far above the United States median of $223, according to the St. Louis Fed.
While the median home price has declined, the price bracket of Palm Springs is significantly higher than the Nation and much of California. The list price of a majority of homes in Palm Springs includes many million-dollar homes. The strong demand for homes in Palm Springs supports the home values and continues to drive the real estate market forward. It is also an indication of a seller’s market.
Days on Market
Nevertheless, there has been a slowdown in the movement of homes. The median days on market have increased 11% to 59 days. During the height of the Covid housing market craze, Palm Springs’ lowest median selling time was 29 days on market. However, back in August 2018, homes sat on the market for a median of 54 days. Therefore, the current days on market for Palm Springs home listings are more reflective of a “normal” market.
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N.A.R (National Association of Realtors) released data recently indicating over 60,000 canceled contracts across the Nation in the month of August. This number represented roughly 17% of transactions entered into.
Buyers seem to be hesitating because of high inflation and high interest rates. While many buyers get pre-approval for a mortgage, when it comes to the final approval, some buyers are financing is falling apart.
Other homebuyers are getting cold feet, wondering if home value will return to the pre-pandemic average. Or are shocked by the total monthly payments, including insurance and maintenance, and choose to walk away.
Nevertheless, Palm Springs will continue to draw home buyers, especially those in a higher price bracket in search of a luxury destination.
The Typical Buyer/Seller
There is a very diverse range of buyers and sellers in the Palm Springs real estate market.
Families who live in the area year-round to retirees enjoy the warm weather and lifestyle of Palm Springs. In addition, Palm Springs is a popular destination location for vacation and second homeowners to investors looking to take advantage of the seasonal and short-term rental demand.
There is a bit of everything in Palm Springs, and this generally means there is a constant flow of homes being listed and purchased.
Is it a good time to buy/sell?
I get this question over and over again. An interesting fact is, in my nearly 20 years of experience, I have received this question, no matter what the market conditions are.
The reasons for purchasing a home are very different for everyone. I believe it is always a great time to buy a home if it makes sense for your situation. In fact, the time will rarely (if ever) be perfect.
The most important thing to consider is making sure your motivation level is sufficient enough to overcome the hurdles and obstacles that will come up during the process. This is true when buying a home or selling a home.
We’ve Passed the Peak
It takes a bit of time to pin down the market’s “top” or “bottom.” At this point, I believe it is safe to say we reached the “top” of the housing market in the second quarter of 2022.
When we look back at what has occurred nationwide over the past 18-24 months, the housing market will be remembered as one of the best (if not the best) real estate markets on record. When we look at the home sales, the home prices, the days on market, and other data points, all signs indicate the market has slowed down.
But the Palm Springs market is only inching down.
Low inventory has assisted in keeping prices strong. Additionally, many experts are predicting strong home prices will continue in the future.
This could suggest that although we have moved past the peak of the market, prices won’t plummet, as some buyers are hoping. There are great opportunities out there for buyers, and waiting for the median price of homes to drop may not happen. It also indicates it is still a great time to sell a home (assuming you have owned it for a sufficient amount of time).
Interest Rates Impact Housing Affordability
Increasing interest rates have impacted the affordability of the Palm Springs real estate market. And sellers will have to adapt. Buyers who previously were pre-approved at $700,000 (our median home selling price in June 2022) can now only afford $550,000 homes with the increased rates. However, sellers aren’t changing prices with the decrease in demand.
As a result, the average days on the market for a Palm Springs house have been increasing for the past several months. There are relatively more listings available on the market, and there are significantly lower numbers of interested buyers. Homes priced above market values are sitting on the market for extended periods of time.
Sellers will need to modify.
Once they catch wind of the market shifts, sellers will reset their expectations for prices and the time on the markets. Homes that are in move-in-ready condition and are priced well are selling quickly. Oftentimes with multiple offers. Homes that are overpriced will sit on the market longer and may end up not selling.
The Future of Palm Springs, CA Housing
My prediction for the market is that we will see “more of the same ” for the next 6-12 months.
Longer days on market, continued low inventory of available homes for sale, high interest rates, and prices will remain stable. I believe the rate of price growth will slow down; however, prices will continue to rise at rates more in line with long-term historical averages.
Homes will continue changing hands between the most motivated buyers and sellers in the marketplace. Many would-be buyers and sellers may end up sitting on the sidelines because of uncertainty and lack of overall motivation.
Real Estate Agents are Here to Support You!
In a shifting market, it is very important to work with a local agent who understands the changing real estate trends. Your agent should also be familiar with the type of property you are trying to buy or sell, so they can best advocate for your needs while setting realistic expectations.
Working with the right agent can also save you thousands of dollars. The right agent will ensure you are protected and that your best interests are kept at the forefront of the transaction. An agent who specializes in the local market can advise you in ways a generalist cannot.