Coachella Valley 2016 Real Estate Annual Market Trends

Palm Springs Area Real Estate Sales and Prices Up in 2017

Sales of single-family, re-sale homes were up 6.9% in 2017.

The median price for single-family homes gained 9.1%, while the average price rose 7.8%.

Condo/attached home sales were up 22.6%.

The median price for condos/attached homes gained 3.5% and the average price rose 3.9%.

Even with the median price of homes up for the fifth year in a row, the 3-month moving average median price is still down 23.2% from the peak of the market, which was in April 2009.

Desert Price Differences
from January 2017 & Peak & Trough
Homes: detached
YTD Peak % Trough % Peak Trough
3-month 10.7% -23.2% 112.8% Jun-07 Apr-09
12-month 8.9% -19.8% 97.5% Nov-07 Nov-09
Homes: attached          
3-month -1.6% -38.7% 47.5% Mar-06 Oct-11
12-month 2.2% -31.0% 44.3% Jun-06 May-12

 

Desert Real Estate Annual Home Statistics
        Change from Year Before
Year Sales Median Average Sales' Median' Average'
1999 4,410 $145,000 $224,493      
2000 4,886 $166,530 $266,243 10.8% 14.8% 18.6%
2001 4,094 $191,000 $285,983 -16.2% 14.7% 7.4%
2002 5,238 $230,000 $310,477 27.9% 20.4% 8.6%
2003 6,243 $267,000 $359,709 19.2% 16.1% 15.9%
2004 8,129 $355,000 $458,884 30.2% 33.0% 27.6%
2005 7,476 $415,000 $559,814 -8.0% 16.9% 22.0%
2006 5,291 $420,000 $617,574 -29.2% 1.2% 10.3%
2007 3,991 $449,000 $644,997 -24.6% 6.9% 4.4%
2008 5,514 $270,000 $430,706 38.2% -39.9% -33.2%
2009 6,966 $182,000 $291,282 26.3% -32.6% -32.4%
2010 6,535 $215,000 $342,995 -6.2% 18.1% 17.8%
2011 7,504 $195,000 $315,106 14.8% -9.3% -8.1%
2012 7,265 $227,000 $350,930 -3.2% 16.4% 11.4%
2013 7,840 $295,000 $425,106 7.9% 30.0% 21.1%
2014 6,330 $312,500 $457,931 -19.3% 5.9% 7.7%
2015 6,360 $318,000 $452,433 0.5% 1.8% -1.2%
2016 6,863 $330,000 $466,182 7.9% 3.8% 3.0%
2017 7,335 $360,000 $502,535 6.9% 9.1% 7.8%

Desert Real Estate Annual Condo Statistics
        Change from Year Before    
Year Sales Median Average Sales' Median' Average'
1999 3,876 $129,000 $159,778      
2000 3,793 $150,000 $180,204 -2.1% 16.3% 12.8%
2001 2,639 $161,000 $191,315 -30.4% 7.3% 6.2%
2002 3,512 $179,900 $200,688 33.1% 11.7% 4.9%
2003 3,870 $195,000 $218,742 10.2% 8.4% 9.0%
2004 4,194 $259,950 $283,402 8.4% 33.3% 29.6%
2005 3,336 $325,000 $353,274 -20.5% 25.0% 24.7%
2006 2,155 $350,000 $383,786 -35.4% 7.7% 8.6%
2007 1,830 $328,500 $363,529 -15.1% -6.1% -5.3%
2008 1,634 $277,500 $302,280 -10.7% -15.5% -16.8%
2009 1,660 $210,000 $225,802 1.6% -24.3% -25.3%
2010 2,058 $185,000 $208,378 24.0% -11.9% -7.7%
2011 2,414 $172,500 $200,310 17.3% -6.8% -3.9%
2012 2,637 $179,750 $205,066 9.2% 4.2% 2.4%
2013 3,466 $205,000 $224,399 31.4% 14.0% 9.4%
2014 2,627 $240,000 $264,840 -24.2% 17.1% 18.0%
2015 2,613 $229,000 $253,725 -0.5% -4.6% -4.2%
2016 2,816 $231,000 $253,653 7.8% 0.9% 0.0%
2017 3,453 $239,000 $263,538 22.6% 3.5% 3.9%

As you can see by the following charts, the largest swings in prices has been in the under $500K segment of the market. Above that, pricing has been pretty stable. Sales were up across the board, with the largest increase in the under $500K segment.

Median Prices
Percent Change From Year Before
  <$500K >=$500K and <$1MM >=$1MM
2000 12.7% 1.0% 0.0%
2001 14.5% 1.2% -3.8%
2002 18.3% -3.9% 0.0%
2003 13.8% 3.3% -3.2%
2004 23.4% 2.4% -1.1%
2005 16.9% 3.1% 3.0%
2006 0.1% -0.8% 2.6%
2007 -1.6% 1.5% 1.8%
2008 -33.8% -2.2% 7.9%
2009 -26.7% -1.5% -8.9%
2010 9.8% 0.0% -0.9%
2011 -8.9% -1.5% -1.8%
2012 16.4% -0.8% -1.8%
2013 24.2% 2.4% 3.3%
2014 10.3% 0.8% 0.4%
2015 7.0% -0.9% 0.9%
2016 3.1% -1.4% 0.4%
2017 6.9% 1.4% -1.6%
Home Sales
Percent Change From Year Before
  <$500K >=$500K and <$1MM >=$1MM
2000 119.9% 34.2% 61.3%
2001 -58.4% -4.0% -24.0%
2002 23.6% 46.0% 30.6%
2003 12.4% 66.5% 38.3%
2004 15.7% 108.7% 149.7%
2005 -18.0% 11.2% 48.6%
2006 -32.8% -34.9% -3.7%
2007 -31.6% -13.3% -19.4%
2008 86.8% -23.0% -26.1%
2009 44.3% -21.2% -45.1%
2010 -11.3% 16.6% 49.3%
2011 18.0% 7.7% -8.1%
2012 -5.1% 7.5% 22.5%
2013 1.5% 52.9% 34.5%
2014 -24.7% -4.4% 6.8%
2015 -12.7% -16.9% -15.2%
2016 5.4% 17.3% 4.2%
2017 0.9% 21.3% 26.7%

How Will the Tax Cut Affect Real Estate?

The Tax Cuts and Jobs Act has been signed into law. There were some big "wins" in the final bill from the perspective of homebuyers, owners, and real estate investors. However the bill removes important incentives for homeownership and may have an adverse impact in some markets. According to the National Association of Realtors, home prices will grow at a slower pace of 1-3% nationally, though some local markets in high cost, higher tax areas will likely see price declines.

"WINS" FOR REAL ESTATE

The final bill did not modify the current law on the exclusion on the gain of sale of a principal residence. The current law states that, to qualify for at $250,000 (single) or $500,000 (married) exclusion on the gain of sale of a primary residence, a homeowner must have resided in a property for 2 out of the previous 5 years. The Senate-passed bill would have stipulated that homeowners must live in their home for 5 out of the past 8 years to qualify. The change would have likely further restricted housing supply in an already constrained market locally and nationwide.

Interest remains deductible on second homes, but is subject to the $1 million / $750,000 limits (see below). The House-passed bill would have eliminated the deduction for second homeowners. This will be particularly important for the demand-side of the Santa Cruz real estate market, where second-home buyers have been trending upwards over the past two decades. 

The final bill allows an itemized deduction of up to $10,000 for the total state and local property taxes and income or sales tax. While less favorable for homeowners than the previous law, this was a major improvement from the House and Senate bills which proposed complete elimination of state and local taxes. 

CAP ON MORTGAGE INTEREST DEDUCTION

The Tax Cuts and Jobs act reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered in and are not subject to the new $750,000 cap. Capping the deductions could contribute to slower home value growth in the priciest communities by limiting some buyers' purchasing power. Santa Cruz is one such community, and will be disproportionately affected.

Interest paid on home equity loans (second mortgages) through 12/31/25 will not be deductible unless the proceeds are used to substantially improve the residence. Typically, this kind of deduction is important for financing major home renovations, so eliminating it could contribute to underinvestment in home repair and updates.

The standard deduction will be doubled from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for couples filing jointly. This change will have a significant impact on the number of homeowners that decide to take advantage of the mortgage interest deduction. According to a study by Zillow, itemizing and claiming mortgage interest deduction will only be advantageous for 14.4% of homes nationwide, a steep decline from the previous 44% of all homes. This reduces the incentive to buy a home and may hurt housing-demand.