As inventory in the valley shrinks, prices may rise

The supply of homes for sale in the Coachella Valley has steadily dropped this year — particularly lower-priced houses that bargain hunters are buying up.

“The inventory levels are some of the lowest we’ve seen in quite some time,” said Patrick Jordan, broker associate with Patrick Stewart Properties, Windermere Real Estate in Palm Springs.

Although inventory levels vary based on various databases, a TrendVision snapshot from the Desert Area MLS shows there were 2,888 single-family homes and 1,295 condos for sale as of Oct. 20.

When a new listing popped up this week on the Desert Area Multiple Listing Service for $503,000 in the Deepwell neighborhood of Palm Springs, real estate agents flocked to the house, in part, because of its attractive price compared to other homes in the area.

“It will sell, probably over asking price,” and there will likely be multiple offers, Jordan said.

The residential active inventory has dropped by more than 1,000 listings in four months, excluding mobile homes, Jordan calculated.

An MLS report showed the valley’s inventory of homes fell 22 percent to 4,418 in September from 5,681 in September 2010. That compares to the peak months of 2007 and 2008, when home sales were booming and monthly inventories regularly topped 9,200, according to the California Desert Association of Realtors.

In September 2008 there were 8,117 homes listed, for instance, and 9,742 in March 2008, according to the MLS.

Realtors, brokers and analysts say several reasons exist for the inventory decline.

Some sellers pull homes off the market in the hottest months, often waiting for cooler temperatures and snowbirds to return, said Patti Rollins, branch manager for Coldwell Banker Residential Brokerage’s Palm Desert office.

Other sellers have pulled their homes off the market rather than settling for today’s lower prices.

“It’s still a bitter pill to swallow for the sellers,” Rollins said.

Homeowners who are able to hold off selling often are waiting for prices to rise, and dwindling inventories could begin to make that happen, said Jim Franklin, broker associate with Prudential California Realty and president of the Palm Springs Regional Association of Realtors.

At the same time, banks and other lenders scrutinized since last fall for foreclosure-processing issues have been slower to take back properties. That has at least temporarily reduced the supply of distressed properties.

“The banks are not exposing their inventory to us as quickly as they were in the past,” Rollins said.

Bank changes

About 424 of the homes for sale in September were bank-owned properties, with another 596 sold or pending during the month. That was a 39 percent drop compared to the same month a year ago.

The valley’s shrinking for-sale inventory parallels a trend in California and throughout the nation.

There were 2.19 million homes listed for sale nationwide at the end of September, down 20 percent from a year earlier, according to a report from the real estate website Realtor.com. That was the lowest level since 2007, when the company began its count.

The California Association of Realtors reported the unsold inventory for single-family homes across California was 5.1 months in September, down from 5.9 months in September 2010.

The monthly index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Realtors said a shrinking supply of homes typically begins to drive up prices, but so far, that hasn’t happened largely because demand remains soft.

The median price in the Coachella Valley fell 8 percent to $167,500 in August, San Diego-based real estate information provider DataQuick reported.

Home sales across the valley have held up relatively well in recent months despite the decline in inventories, real estate professionals and analysts said.

Buyers’ market

Low prices, coupled with historically low interest rates, are among reasons buyers are signing deals.

Steve and Geri Downs with Coldwell Banker Residential Brokerage said more homes are selling in cities such as Rancho Mirage and Indian Wells, where buyers often seek gated communities and country clubs.

Mike and Barbara Kline anticipated it would take longer than it did to sell their custom-built, 5-year-old home in Orange County. They worked with Geri and Steve Downs to find another, smaller home where they plan to retire in the valley.

A key strategy that worked for the Klines when selling is pricing it right.

“You can’t have this overinflated idea of what you thought you might get five years ago,” Mike Kline said.

Despite the lower inventories, the Klines were able to look at nearly 50 homes near their price range and narrow it down to about 10 options.

“You get more bang for your back (than in Orange County), no doubt about it,” Kline said.

Nancy Beard also relied on Steve and Geri Downs to find her a house in Mission Hills in Rancho Mirage when she retired and sold her home in Long Beach.

There were plenty of homes to choose from in gated communities with access to golf courses, Beard said.

Steve Downs said for home prices to eventually recover, home inventory must continue to drop and sales volume must remain healthy.

“It appears this is a continuing but very slowly evolving trend,” he said. “Don’t look for price recovery for at least 12 months.”

Improving economic conditions, particularly job growth, is another factor necessary to drive recovery, Realtors said.

“Once job numbers kick in and America goes back to work, we will be back on our way,” Jordan said.

One factor that could affect the valley’s market is an existing, but undetermined, “shadow” supply of foreclosures — distressed homes that banks have yet to put on the market.

When those properties hit the market, the typically lower foreclosure prices could push down any price gains.

Greg Berkemer, executive vice president of the California Desert Association of Realtors, said lower-priced homes are selling, and those inventories are being depleted initially.

“One distinguishing difference about this housing shift is that the market collapsed from the bottom,” Berkemer said.

“In 2005 and 2006, the lowest-priced homes stopped selling — and the more expensive ones kept selling. The market is healing itself in the same way.”