I hear the same question from a lot of people: “When are the prices going to get back to where they were now that we are at the bottom?”. The answer, in our opinion is “a lot longer than it took the prices to drop”. Since the 1960s, when real estate sales data first started to be recorded, real estate has appreciated at an annual rate of approximately 4.5%. There have been minor fluctuations but up to 2002 sales closely followed the line.
In the period from 2002 to 2006, we saw sale prices jump 79.5% and from 2006 through 2009, we watched prices drop 48% and since settle back on the 4.5% “normal” line. Since 2006 and especially since September 2009, most real estate sales have been in the lower range, starting with “distressed” (lower priced foreclosures and short sales) and very slowly moving up in price as the lower priced supply dwindled and consumer confidence improved.
As I thought about this, I wondered just what was the size and price of the “Average” home sold in the valley? The chart below represents all valley sales from the Desert Area MLS. I did a standard search for residential sales and the only parameter I set was the date so the info is based on all reported sales in the entire MLS area – Desert Hot Springs to Indian Wells to Salton City.
| Year | Units Sold | Avg SqFt | Avg Sale Price | $/SqFt | DOM |
| 2004 | 12,561 | 1,891 | $397,138.00 | $210.01 | 62 |
| 2005 | 11,126 | 1,878 | $490,825.00 | $261.36 | 71 |
| 2006 | 7,743 | 1,944 | $542,183.00 | $278.90 | 111 |
| 2007 | 6,123 | 2,034 | $545,410.00 | $268.15 | 139 |
| 2008 | 7,435 | 1,970 | $394,831.00 | $200.42 | 128 |
| 2009 | 9,280 | 1,886 | $271,567.00 | $143.99 | 126 |
| 2010* | 9,140 | 1,976 | $318,461.00 | $161.16 | 128 |
| * Projected total | Â | Â | Â | Â | |
| Â | Â | Â | Â | Â | Â |
| First 6 months of 2010 | Â | Â | Â | ||
| Month | Units Sold | Avg SqFt | Avg Sale Price | Â $/SqFt | DOM |
| January | 688 | 1,956 | $309,900.00 | $158.44 | 123 |
| February | 693 | 1,911 | $302,244.00 | $158.16 | 125 |
| March | 947 | 1,934 | $300,104.00 | $155.17 | 120 |
| April | 917 | 2,004 | $325,520.00 | $162.44 | 132 |
| May | 899 | 2,047 | $348,942.00 | $170.47 | 137 |
| June | 882 | 1,990 | $319,486.00 | $160.55 | 129 |
| 6 Mos | 5,027 | 1,976 | $318,461.00 | $161.16 | 128 |
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As you can see, the sales price per square foot ($/SqFt) from the high in 2006 – $278.90 dropped to the low in 2009 – $143.99 (-48.4%) but has rebounded in 2010 to $161.16 which is 42.2% from the 2006 high. Remember that these numbers represent all the homes in the valley so it is skewed by the “distressed” property sales. I feel that prices in the more affluent communities has dropped about 35% from the 2006 high. Some of the higher priced homes, ($1,000,000+) have still not seen much interest.
This, now, makes me wonder just how different some of the local cities stack up against one another. I included, in the following chart, the cities of Desert Hot Springs and Coachella which clearly show the affects of distressed property sales as compared to more affluent cities in the valley.
| 2006 | Units Sold | Avg SqFt | Avg Sale Price | $/SqFt | DOM | Â |
| DHS | 663 | 1,575 | $285,136.00 | $181.04 | 119 | Â |
| Coachella | 182 | 1,592 | $324,223.00 | $203.66 | 76 | Â |
| Palm Springs | 1,565 | 1,652 | $483,783.00 | $292.85 | 113 | Â |
| Rancho Mirage | 631 | 2,763 | $872,763.00 | $315.88 | 122 | Â |
| Palm Desert | 1,177 | 1,948 | $602,591.00 | $309.34 | 106 | Â |
| Indian Wells | 196 | 2,987 | $1,146,332.00 | $383.77 | 111 | Â |
| La Quinta | 1,098 | 2,354 | $771,522.00 | $327.75 | 117 | Â |
| Â | Â | Â | Â | Â | Â | Â |
| 2010 | Units Sold | Avg SqFt | Avg Sale Price | $/SqFt | DOM | % Drop 06-10 |
| DHS | 421 | 1,542 | $94,793.00 | $61.47 | 82 | 66.0% |
| Coachella | 201 | 1,876 | $142,058.00 | $75.72 | 74 | 62.8% |
| Palm Springs | 850 | 1,769 | $315,595.00 | $178.40 | 133 | 39.1% |
| Rancho Mirage | 342 | 2,632 | $575,157.00 | $218.52 | 184 | 30.8% |
| Palm Desert | 676 | 1,898 | $369,961.00 | $194.92 | 141 | 37.0% |
| Indian Wells | 126 | 3,052 | $830,372.00 | $272.07 | 217 | 29.1% |
| La Quinta | 705 | 2,388 | $519,612.00 | $217.59 | 158 | 33.6% |
The chart above also uses data from the Desert Area MLS and shows the change from 2006 to 2010 by city. Although the 2010 numbers only represent 6 months of data, the current sale price info is still relevant.Â
But I digress, (sorry), back to the original question. If the home sale prices continue to appreciate at the normal 4.5% rate, home sale prices should get back to 2006 levels in 2020. In other words, keep breathing .