The Market Watch Monthly Housing Report

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1 Price per sq. ft. $260 CV median price per sq. ft Jan 2016 $240 $220 $200 $180 $160 $140 $ $ $120 $100 Median Price per Sq. Ft. 3.5% Growth Curve Summary We have decided to alternate every month showing price returns for the Valley and for each city in median price per sq. ft. and then the next month, the median price. This month all prices will be the median price per sq. ft. The above chart is a fourteen year graph of the median price per sq. ft. in the Coachella Valley. While each city has its unique features and price movement, this overall number does indicate the overall trend in home prices over the long term. As we see, the Valley s median price in January was $ just $2.80 less than the same time last year. The twelve month change in median price per sq. ft. of the nine major cities shows seven positive returns and three negative ones. All changes were low single digit. Sale s continue to be stable, with a 694 sales per month average over the last twelve months, one more than the twelve month average one year ago. The combination of an increase in inventory and stable to lower home sales has pushed the Valley s months of sales ratio to 8.4 months. This is the highest ratio since the spring of 2011.

2 12 month change in the 2016 median price per sq. ft. of each city Jan-16 Year Ago 12 Month Change 2011 Low Gain off Low 2006 High % from High Desert Hot Springs $108 $ % $ % $ % Indio $150 $ % $ % $ % Cathedral City $159 $ % $ % $ % Palm Springs $278 $ % $ % $ % City of Coachella $117 $ % $ % $ % Rancho Mirage $226 $ % $ % $ % Palm Desert $190 $ % $ % $ % La Quinta $203 $ % $ % $ % Indian Wells $242 $ % $ % $ % Changes in City Price per sq. ft. The twelve month change in median price per sq. ft. of the nine major cities shows seven positive returns and three negative ones. All changes were low single digit. This is the first month when the twelve month change didn t include one city with at least a double digit gain. Desert Hot Springs, Indio and Cathedral City are the current leading cities. Two of these three cities still have about 10% of their sales from distressed sales and some of their gains come from the natural rise in median values as the percent of sales from distressed properties declines.

3 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Units 1,100 Coachella Valley Home Sales Jan 2011 to Jan , month avg. 12 month avg. 591 Monthly Sales Sale s continue to be stable, with a 694 sales per month average over the last twelve months, one more than the twelve month average one year ago. The seasonal three month average, which must only be compared to the three month average at the same time every year, is 591 units a month, down 7% from the January number last year. We were hoping that 2016 might be a year of expanding sales but starting the year with this lower reading seems to indicate that if sales are to expand it will probably happen a little later in the year.

4 Units 160 Home Sales by City 3 month avg sales Jan 2015 Year Ago Home Sales per Month by City While the region s three month sales average is 7% lower than a year ago, most of this is from just three cities Palm Springs, Palm Desert and Cathedral city. Palm Springs is averaging 26 sales less than last year, Palm Desert is off 17 units while Cathedral city is off only seven. A few cities show small increases. Sales in Indian Wells are up 19% and in Coachella, they re up 13% although in terms of numbers that represents just two more sales a month. Desert Hot Springs is averaging four more sales a month which is an increase of 11%.

5 Units 250 Home Sales by Price Range 3 mos avg Avg Sales Last Three Months Same Time Last Year Home Sales by Price Range When we look at home sales by price range we see small declines in almost all price brackets except between $500k and $700k. Sales for homes priced under $200k are down 7%, which simply reflects the fact that there are now fewer homes priced in that range. Sales for homes priced from $200k to $300k, which represents the largest selling price range in the Valley, are down only 5%. Between $300k and $400k sales are unchanged but are down 10%between $400k and $500k. Sales at the higher end homes priced over $700k are also starting to show small declines. Hopefully sales levels will pick up compared to last year as we move into spring.

6 7,000 Valley Housing Inventory Feb 1st 2011 to Feb 1st ,000 4,975 5,801 U n i t s 5,000 4,000 3,000 2,000 1,000 Coachella Valley Listed Inventory. The most challenging situation comes to us from the growing size of the inventory. As of February 1 st inventory stood at 5,801 units. Last year on February 1st it was 4,975. The current inventory is the highest level since April of This would not normally be as challenging this far in to the recovery cycle since sales would normally expanded to absorb it. It our opinion that the main problem are the new government banking regulations which are preventing sales for many qualified homebuyers, homebuyers who would have qualified during under normal and acceptable regulations in the past.

7 Months Days 9.0 "Months of Sales" and "Days on the Market" Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Months of Sales DOM Months of Sales and Days on the Market The combination of an increase in inventory and stable home sales has pushed the months of sales ratio to 8.4 months. This is the highest ratio since the spring of Now part of this increase is seasonal; the ratio almost always peaks in February as agents bring more property to market in anticipation of rising sales as we enter early spring. If this pattern continues we should see the ratio begin to come down somewhat, possibly back into the six month range. While this is still a little high it is a much more acceptable number. It is encouraging that the median number of days on the market remains low at 76 days.

8 Months Months of Sales by Price Range uses avg. twelve month sales Feb 1st 2016 Year ago Months of Sales by Price Range When we calculate the months of sales ratio at different price brackets we see a higher number compared to last year in all brackets. Only two price brackets now have ratios under eight months all prices under $300k. This shows that the higher inventory is spread through all price ranges. This is especially true for homes priced over $700k. For homes priced over $900k, months of sales ratios are getting as high as twenty four months or two years.

9 Months of Sales by City city inventory divided by average twelve month sales M o n t h s Feb 1st Year Ago Months of Sales by City The same is somewhat true when we calculate months of sales for each city. Except for the city of Coachella, which has a ratio of 2.8 months, Thousand Palms, Desert Hot Springs, Palm Springs, Indio and Cathedral City are all about six months. Then we have the regional average at 8.4 followed by a large jump to 9.2 months for Palm Desert, 11.5 months for LA Quinta,then12.9 and 16 months respectively for Rancho Mirage and Indian Wells.

10 Percent of Total Sales 40% Distressed Sales by City percent of total sales Jan Year Ago 2 Years Ago 30% 20% 17.2% 10% 3.2% 4.8% 4.9% 6.3% 6.3% 6.4% 7.9% 7.9% 9.0% 10.3% 11.1% 0% Distressed Sales by City Distressed sales (REO and short sales) remain stuck at about 6%, a range it s been at now for about two years. Three cities still have distressed sales over 10% - Cathedral City, Desert Hot Springs and the little area of Bermuda Dunes. As we mentioned earlier, this is one of the reasons why their median price has risen so much compared to last year. As distressed property is slowly worked off, there are fewer low distressed prices in the mix, which tends to bring about a natural rise in the median price

11 -1.0% Sale Price Discount from List Jan % -2.0% -2.5% -2.8% -2.6% -3.0% -3.5% -4.0% Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Sale Price Discount from List The Sale Price Discount from List is the median value over the last three months of the percent difference between the sale price and the asking list price on all detached home sales. The current value is minus 2.6%, which is a small increase compared to two months ago when it was minus 2.1%. However, it is exactly equal to what it was one year ago. A reading of minus 2.6 implies that the selling discount to a home listed for $300,000 is approximately $7,800.

12 price per sq. ft. Attached Units - median pr per sq. ft. January 2016 $180 $170 $164 $164 $160 $150 $140 $130 $120 $110 Price per sq. ft. Attached Units - Median Price. The median price per sq. ft. of attached units in the Valley was unchanged in January compared to a year ago at $164. A careful scan of the accompanying graph shows that the median condo selling price has remained relatively stable in the Valley since late We think that seasonal forces could now bring a small lift to prices as we head into spring and summer.

13 Units Attached Sales January month sales Attached Units - Sales The three month average of attached sales was 197 units in January compared to 220 units a year ago. This 10% decline is very similar to the decline in three months sales in the detached, residential market. Here too there are obvious seasonal factors and we expect sales to go over 230 to 240 units again as we move through the season and into the summer.

14 Explanation and Description of Market Watch s Graphs and Calculations Prices: All prices for the region and for cities are the median value of all transaction over the last three months (except for Indian Wells which is six months due to the small number of monthly sales). For example, the median price for the month of May will be the median value of all sales in March, April and May. This longer time period tremendously reduces the amount of wide and meaningless variation that one gets taking only the last month s transactions and provides more reliable information. While we do show the median selling price in our city reports, we try to emphasize the median price per sq. ft. in both these and our regional reports. For technical reasons this metric is more reliable than median price and presents us and the reader with fewer statistical anomalies and variations. Sales: Sales are reported either as three month average sales or twelve month averages. The three month average measures and shows the seasonal variations of the region. These three month averages should only be compared against the same three months of previous years. For example, one should never compare three month sales in spring to that of the fall. The twelve month average takes out all seasonality and is very useful when trying to assess the long term growth or contraction of sales in the region and at the city level. Inventory and Months of Sales: When we provide a monthly report for say the month of May, all sales and pricing are done using transactions throughout that month and the previous two months. However, when we measure inventory at the end of May, it s the inventory as of June 1 st the next month. Remember sales and prices are accumulative while inventory is a momentary snapshot of inventory on a specific date. To avoid confusion, the inventory reported in the May report is for June 1 st. and our graphs and charts for inventory and months of sales will give this date and not the date of the month of the report. When calculating months of sales we almost always use average sales over the last twelve months and not three months. If we do use three months we will indicate that we are dividing inventory by three month sales and not the normal twelve month average. Days on the Market and Sale Price Discount from List Price: These calculations are also the median value of the metrics reported from the MLS listing and are calculated over the last three months of transactions like price and sales. This is done to help reduce random variation and movements. Call Out Numbers: The two numbers inserted in the charts are the most recent value(s) and the value(s) one year ago. Each number is generally connected to the point on the chart it refers to by a small thin line. Scatter Diagram Value Curve: In the individual city reports we provide a Scatter Diagram Value Curve which plots the price per sq. ft. of every sale for the last three months versus the square feet of that home. In the graph each small blue circle represents a sale. Then a best fit linear line is calculated through those points using the least square method to arrive at the value curve. The value curve represents the price per sq. ft. that the market is generally giving different size homes. We provide the actual linear equation for people who might want to use it to calculate prices for different size homes. To Contact Market Watch call Vic Cooper at