Many of us have quickly turned the page on 2020, a year with numerous pandemic-driven declines across several businesses. Conversely, the housing industry continues to shine as a bright spot, and many are hopeful the market will continue to prove lucrative for sellers. Particularly in Palm Springs, early pandemic predictions foretold months of doom and gloom. However, a Coachella Valley market continues to defy expectations even today.
Forecasts expect the pandemic-induced housing spike could benefit the Palm Springs housing market for the long term. Consider that the median home price increased by more than 10% in some areas from summer 2019 to summer 2020. While that specific growth may prove untenable for another year, the overall market conditions contributing to its growth are not going anywhere. Sellers should continue to see a favorable market through the end of 2021 and maybe even a bit beyond.
Let's explore the ins and outs of selling homes in the desert as we gain a better understanding of Palm Springs’ real estate market.
Low Inventory, Low Interest Rates
For a seller, the combination of low inventory and low interest rates is something worth celebrating. While many wish it had occurred under different circumstances, the pandemic-driven scenario is what made 2020 such a lucrative year for those brave enough to list a home for sale. We say brave only because a portion of the inventory shortage was aided by hesitant homeowners, as they initially feared listing a home in a pandemic was unwise. While this is a sound strategy, the market happened to play out a bit differently in 2020.
The primary fuel to buyer interest last year was historically low interest rates. Sub-2.75% rates were the norm, and last year was not the exception. Toss in aggressive buyers, tepid sellers, and new development grinding to a halt, and the market became lucrative magic. The Palm Springs market in 2021 will still experience a combination of those factors, just less amplified. According to the California Association of Realtors, buyers can expect only a modest increase in the sale of single-family residences. Additionally, with mortgage rates expected to rise throughout the year slowly, low interest rates will remain highly attractive to buyers.
New development—which ground to a halt in 2020 due to lockdowns and shelter in place mandates—will not recover enough in 2021 to make any noticeable dent in ramping up supply. It may not be until mid-2022 or even 2023 when new development is back to pre-pandemic activity. While growth will accelerate in a few years, the pandemic's immediate impact and the rising costs of materials and land will cause a slow recovery. For now, resales will carry the market through 2021, which is excellent news for those listing homes for the remainder of the year.
Stabilizing Home Prices
After a massive jump in home prices from 2019 to 2020, pricing is expected to cool off in comparison throughout 2021. This doesn't mean there won't be another increase; it just means home prices may be a bit more modest.
As previously noted, much of the Coachella Valley market saw median home prices jump upwards of 10% or more. For 2021, the increase could be anywhere from 1.5%, according to the California Association of Realtors, which would place the median sales price at around $650,000 to 3.0%. Still, other forecasts are much more optimistic, especially when looking at specific submarkets. For example, the Indian Wells area could see a median home price increase near 7%. Thousand Palms could best that with a prediction at 7.5%.
Overall, prices are expected to rise again in 2021 across Palm Springs. It may not be the banner year that 2020 saw growth-wise, but sellers will remain in the driver's seat. There's little to show that demand will taper off, and with interest rates still attractive, expect the best homes in the best neighborhoods to command competing offers.
Shifting Buyer Needs
One aspect that continues to drive the popularity of housing in Palm Springs has its roots firmly planted in the pandemic. Palm Springs has always proven a hot spot for the kickback-and-relax crowd. It is, after all, something of a resort community. Because of this, the area is now a popular option for the work-from-home set.
After the pandemic made many in-office work scenarios impossible, employers were forced into a long-term experiment—large swaths of employees working from home. Many months filled with more successes than failures passed, and the convenient locale of big cities no longer cornered the market on the commuting worker.
Remote work is not only drawing the usual suspects from cities such as Los Angeles, San Diego, and San Francisco, but it’s always bringing in those seeking a better lifestyle than that offered in other parts of the country. The allure of year-round, near-perfect, dry, desert weather, less density and open land, a more family-centered vibe, and plenty of leisure activities to enjoy once the workday is done could draw anyone in. Additionally, even with rising prices, Palm Springs remains relatively affordable when compared with coastal California or big cities further up the west coast, or those in the eastern U.S. Sellers with a home near the top schools or the best golf course stand to capitalize the most on the current migration.
Investment Buying a Key Driver
As a standard second home community, Palm Springs has long been an in-demand region for investment dollars. Even through various market ups and downs, typical for resort communities, real estate investment remains one of the safest places to build wealth.
Not only did the pandemic reinforce this thinking, but it reinvigorated Palm Springs as an engaging investment opportunity. Despite rising prices, Palm Springs offered an attractive point of entry for cash-flush investments versus pricey vacation destinations elsewhere in the county. For those financing, interest rates made single-family homes equally accessible, even if some of those buyers had to toss contingencies and inspections by the wayside to score the home.
Again, for the same reasons, the newly christened work-from-home crowd is choosing Palm Springs, as the area remains a popular spot for leisure travel. With the reins on such treks beginning to lift, investment-minded buyers are looking for a significant return from travelers looking to break their cabin fever.
Advice for Sellers
As a potential seller, you may be wondering what the catch is. High demand, low supply, and even lower interest rates brought an influx of new homeowners and investors from near and far. If it all seems too perfect, it is, and it won't last forever.
The most significant risk for a seller in this type of market is unloading a property and not having a game plan for your next living situation. In other words, you don't want to be caught out in the same market that looks so favorable upon the property you have to sell. If you want to capitalize on a hot market, make no mistake: now is the time to sell. Just make sure you have a game plan before you list. If you already have housing set up, then your current listing proves incredibly lucrative.
If you're without a future residence, consider options such as a short-term bridge loan. Designed to assist homeowners in purchasing a new home while waiting for their current home to sell, bridge loans tap into the former's existing equity to secure a down payment for the latter. There's a bit of risk involved, specifically the need to carry two loan payments if your current home isn't paid off until you sell your listing. In the current market, that shouldn't be too long of a wait.
If you do choose to list, partnering with a knowledgeable local listing agent will ensure you maximize your home's sale potential. From prepping and staging to marketing and pricing, the right listing is invaluable in assisting you in navigating this once-in-a-generation seller's market. Particularly when it comes to the list price, a savvy Palm Springs agent will bring years of market knowledge to the table. They'll ensure your listing is competitive and priced at the correct number to attract the greatest interest and a higher number of offers.
If you're ready to explore the best of Palm Springs real estate and need a trusted partner, contact The Bernal-Smith Group today to start your second-home buying journey. From property in Palm Springs to Indian Wells or Rancho Mirage homes for sale, allow Bernal and his team's years of experience and expertise to be your guide to Coachella Valley's luxury real estate market.