Marketwatch: January 2007

Palm Springs Area

Type	New Listings	Pendings	Listings/Sales Ratio
Single Family Homes	1380	272	5 to 1
Condos	526	95	5.5 to 1
Multi-Family	39	7	5.6 to 1

San Diego

Type	New Listings	Pendings	New Listings/Sales Ratio
Downtown Condos	164	53	3.1 to 1

As we anticipated, the sales activity as well as new inventory increased substantially from December.

Prices are not declining in most areas. We no longer have the “the house across the street sold for $700,000, but I have a better tile floor so my house is worth $750,000 scenarios. I see this as a good thing as the market stabilizes and returns to normalcy. Those of us that have been in the real estate market for a long time appreciate this type of market.

A couple of sectors that are having some “issues”...Multi-family. Cap rates actually declined to around 2.5 to 4 in most areas during the 2004/2005 market. Without the benefit of rapid appreciation, this type of cap rate is not attractive to most investors. Inventory is increasing dramatically for multi-family and prices are being reduced. I believe this will continue until rents start rising enough to bring cap rates back into the 5 to 6 range.

Areas that have a large number of new single family home tracts for sale are experiencing price reductions on resale property. This is especially true in Desert Hot Springs and La Quinta. The builders have a lot of unsold inventory, the investors that wanted to “flip” properties are out of the market, builders are lowering prices/offering substantial concession packages. Why would someone purchase a resale home that is 10 years old when they can buy a new home for the same price?

For the first time in my 30 years of experience, the number of “back on the market” properties are almost 50% of the properties going into pendings. Apparently buyers are under the impression during the escrow period, they can ask for lots of concessions/repairs that sellers are declining to do.

That’s my take on things for this month. If you have any questions or want clarification of anything, give me a shout.

Happy February and don’t forget to send your loved one a Valentines Treat