Oct 09 2007
State of the Real Estate Market in the Palm Springs Desert Area As Compared to the Inland Empire Region in Southern California
by R. Sebastian Gibson
As of October 2007 with Halloween approaching we have both good news and bad news as they relate to the housing market in the Coachella Valley. Trick or Treat. You want the good news or the bad news? Good choice. We’ll discuss the good news first.
It’s not as bad in the California desert as it is in Phoenix. And it’s not nearly as bad as it is in the Nevada desert boom town of Las Vegas. It’s not even as bad as it is in the rest of the Inland Empire. According to a recent news story on one of the news sites online, moving vans are being utilized in the night by some residents in Phoenix as people simply abandon the houses they can no longer afford.
Lets take the sales data for existing, single-family detached homes. Sure, sales are down, but they were down less than 17 percent in August year over year, compared to being down over 47 percent in the Riverside/San Bernardino area.
For the month of August, prices year over year in August were down only one tenth of one percent in the Palm Springs/lower desert area compared with being down 4.1 percent in Riverside/San Bernardino.
If you don’t want the bad news (the trick, as opposed to the treat) stop reading now.
Okay, here it is. The latest gloom and doom predictions are that the housing problems won’t peak until 2009. That’s two years from now. And if that is the peak of the problem, that may mean that the housing problems may still be with us throughout 2009 and possibly even further.
More bad news comes in the way of areas in which double digit drops in the prices of median single-family houses are expected. Among those areas in which these predictions have been made are the Riverside/San Bernardino/Ontario area in which a 15.9 percent drop is expected. So long as the desert area isn’t included in that grouping, things could be more rosy for the desert area of Palm Springs/Palm Desert.
By way of anecdotal information, people are saying that banks themselves who have been taking in foreclosure properties in record numbers are themselves refusing to drastically cut the prices of the houses they are trying to sell, even as home builders make some drastic price reductions. Why? That’s not hard to figure out. If they lower the prices dramatically, they will have to lower the prices by the same amount or even more on their future foreclosures and that means writing down more losses. And that is something banks probably don’t want to do right now. The subprime write downs by banks and other entities may so far be only the tip of the iceberg. We’ve already seen NetBank go out of business and strangely, very little has been written about the losses that may be suffered by those individuals who had deposited sums in excess of the $100,000 protected by the FDIC. With greater subprime losses, it simply is unknown what other banks could be sweating out a materialization of the predicted double digit price declines, that so far have not yet come to pass.
For those of you who have not read about NetBank, federal regulators recently shut down the online bank which had $2.5 billion in total assets and $2.3 billion in deposits because of an unsustainable level of mortgage defaults. The FDIC said that $1.5 billion in insured deposits will be assumed by ING Bank. However NetBank had $109 million in deposit accounts that exceeded the FDIC limit and those customers will become creditors in NetBank’s receivership. This is not a good thing to hear for those depositors.
If you are scared, it is the season for tricks, after all. But hopefully, there are some treats to be had as well.
Sebastian Gibson is an attorney as well as a realtor and broker with Sebastian Gibson Properties in Rancho Mirage, California (760) 568-1640. The website for Sebastian Gibson Properties is www.SebastianGibsonProperties.com
