High end home sales in the Palm Springs area have taken a big hit.  It’s hard to see trends when sales are combined with low end foreclosures, or when looking at a given price bracket.  If for example you look at homes that sold for over $1,000,000, your numbers are skewed by those homes that once sold there, but now sell for less. 

The first graph below attempts to get around this by looking at a constant group of homes in four Valley cities (Palm Springs, Rancho Mirage, Palm Desert and Indian Wells) that are all 4,000 square feet in size or larger.  To get rid of the “noise” of wide variation of sales prices in this range, each point on the graph represents the moving average sales price of the immediately previous 60 sales. In addition to the big average sales price drop, there are many fewer sales per month now than at the peak.

The second graph showing just the most recent 60 sales, doesn’t show any major change in the overall trend. In this graph the line doesn’t represent a moving average but just the overall trend.  Keep in mind these are what people are buying, and don’t reflect asking prices.  Those wanting to sell though should look at the prices that are selling.

I had expected to see a leveling off or even a small average price increase.

A significant drop in the number of sales of large homes over $3,000,000 can be attributed to falling sales prices, fewer buyers, or both. There is no doubt prices have fallen at the high-end, so many have dropped out of this niche, but it also shows that high-end sellers should attempt to price below this no-man’s land.

Home Sales Over $3,000,000

Sale prices could drop more in any given development if they haven’t returned to circa-2003 levels that deflate prices back to their non-bubble growth rate. This has happened in several local high-end communities, so there are some good deals around, but not all.

Those holding out for a return to the top, may wait a long time. It took LA ten years to recover from the 1990’s housing decline. Housing appreciates at the inflation rate, around 2.5%, so it could take even longer than that. This applies to all price ranges. If you want to sell, price to market. Most buyers are then confident that they can buy safely.

We’ve seen higher- end home prices drop here at a rate of 1.5 to 2% per month, since January 2008.   A 35% or more price reduction from the highs in 2006-2007 is not uncommon.  In the last few months though, prices seem more stable and we may get a modest annual boost from the increased numbers of buyers here for our winter season. 

For individual sales exact trend prices may not matter too much as buyers are willing to pay more for a property they love and less for one they want to upgrade.  Two buyers may easily differ on the value of a home by 10%, which can mask any short-term trend value change.   The amount of inventory can also affect price if the lower priced homes in the same class are bought first – leaving later buyers with fewer choices and higher prices.

So, in a stable or further declining market, there is no reason for Sellers to wait as prices are not expected to rapidly rise if history repeats itself.  It took LA 10 years to recover the high they experienced in 1999 from the housing downturn then

It’s also a good time for Buyers, as we may be seeing the bottom.  Those buyers who believe we can go down another 20% might wait, but that’s a gamble.