Friday, April 11, 2008

Thoughts on Visiting Palm Springs

I recently visited Palm Springs, California, on vacation. I have to admit that I was shocked by the extent to which the current real-estate crisis is impacting this area. I live in western Washington State, where house prices have held up pretty well in the last year compared to the rest of the country; so I was not prepared for what I would see when I visited Palm Springs: A real-estate market in serious trouble.

For the first few days of our vacation, my wife and I stayed in a rented timeshare in Indio, just outside of Palm Springs. This timeshare was newly built, and was part of a development that included a golf course and some very recently built houses. Upon entering this development, I could not help but notice a large sign that read: "New Single-Story Homes from the Low $200s". Something looked strange about the sign, so I slowed down to take a closer look; at which point I noticed that the "2" in "$200s" was a sticker that was starting to peel, revealing a "3" beneath it. That the developer was dropping their asking prices was no surprise, but that they would drop their prices by so much, and use such a tacky sticker to change their advertising was a bit of a shock. And even at these lower prices, the neighborhood looked to be about 30% vacant.

The next shock came when I noticed several billboards carrying the following stern warning: Stealing Copper Pipes Will Land You Behind Bars. I had read about problems with theft of copper pipes from vacant new-construction houses in various national newspapers, but this was the first time that I had visited an area where copper theft was enough of a problem to warrant billboards to warn against it. This is certainly a sign of the times, demonstrating how the confluence of rising commodity prices and falling house prices have combined to create a situation where the copper in a house is the most valuable (and certainly the most liquid) part of that house.

The final detail that I noticed in Palm Springs was just how many of the retail spaces were vacant. In some cases you would see vacant storefronts or restaurants on major streets next to thriving businesses; in other cases I found entire new construction strip mall developments without a single tennant. This demonstrates that what started as a downturn in housing is rippling into a a downturn consumer spending and commercial real estate, at least in areas as hard-hit as Palm Springs.

No comments: