Palm Springs real estate industry shows signs of life after hellish '93.

The 12 months which ended Dec. 31, 1993 may well be remembered as the year from hell by the Palm Springs-area real estate industry.

That was, after all, the year in which the number of new and resale home escrow closings slid to 8,666 -- down by several thousand from prior years, and down from a high of 17,313 in 1989.

The year of 1993 also marked the year in which construction valuation hit its lowest point since 1982. And the number of Palm Springs-area housing starts continued on the steadily downward trend it has been following since 1988.

Yet 1993 may also have been the year that things finally began to turn around. Several new Palm Springs-area housing communities showed up regularly on the index of the 50 best-selling projects in Southern California. Also, some local economic indicators ticked up during the first half of 1994. And the industry seems confident that the possible advent of Indian gaming in the area will start a new run of good luck for the local economy.

Bright spots

During 1993 and the first quarter of 1994, eight separate new housing communities or subdivisions in the Palm Springs area made the 50 Best Selling Projects Index for Southern California, which is issued quarterly by the Meyers Group, Newport Beach.

First among these is Del Webb's Sun City Palm Springs in Bermuda Dunes. The 1,600-acre active adult community has been the best-selling new home community in all of Southern California since it opened its gated entrance in July 1992.

To date, sales have averaged more than one per day for two years, totaling 765 home sales, with 603 of those having closed escrow. That means one out of every four new-home escrow closings in the Palm Springs area during the past two years has been a Sun City home.

Planned for an approximate 10-year buildout, Sun City Palm Springs is designed to eventually be home to 10,000 retirees and pre-retirees, age 55 and older.

Another standout in the area is a new country-club community of the type for which the area has become famous. Indian Ridge in Palm Desert, developed by Sunrise Co., recently reported that during the first half of 1994 the project posted the strongest sales in the company's 25-year history.

The area's other best-sellers, ranging from Kaufman and Broad's California Palms and Inco Home's Summer Place to Rancho Del Oro, tended to target first-time home buyers and be located in the less-expensive cities of Indio and Desert Hot Springs.

Bottomed out?

Individual successes, though, do not tell the whole story, or how far the industry has to come back. In 1993, construction permit valuation totaled $331 million in the Palm Springs area, a 35-percent decrease from 1992's total construction permit valuation of $513 million.

Palm Desert led all areas in 1993 valuation, with more than $74 million, followed by the Desert Sands district of unincorporated Riverside County, in which Sun City Palm Springs is located, with $47 million.

The eastern part of the Coachella Valley experienced more construction-related activities than other parts of the valley. The city of Coachella and the Coachella District of the unincorporated territory both saw increases in construction permit valuation during 1993, compared with the prior year, while Indio experienced the smallest drop among areas experiencing downturns. Specifically, Indio's 1993 construction permit valuation was 5 percent below that of the prior year.

All other cities and areas saw drops in permit valuation ranging from 18 percent in Desert Hot Springs to 61 percent in Indian Wells. Palm Desert, Palm Springs, Cathedral City and Rancho Mirage each were down more than 40 percent for the year.

The value of single-family residential construction for the entire Coachella Valley in 1993 declined 33 percent -- to $203 million; commercial/industrial construction declined 63 percent -- to $36 million; and the value of multi-family residential construction dropped 31 percent -- to $9 million.

Of the total value of construction that took place in the Coachella Valley during 1993 ($331 million), single-family homes accounted for 61.3 percent of the total, churches and public-sector projects accounted for 23.6 percent, commercial/industrial projects accounted for 10.8 percent, multi-family homes accounted for 2.8 percent and mobile homes accounted for 1.5 percent.

The news began to get better during the first half of 1994, with construction valuation totaling $216 million. For the half-year, construction was up 20 percent from the like year-earlier period, with single-family residential up 26 percent, and multi-family up 113 percent. But commercial construction valuation was down 37 percent during the first half of 1994, compared with the first half of 1993.

Pent-up demand

As the central part of Riverside County, located almost mid-way between the city of Riverside to the west and the Arizona border to the east, the Palm Springs area has grown at a pace similar to that of its county -- one of the fastest-growing in California.

The area's permanent population grew from about 122,000 in 1980 to more than 258,000 by January 1994, an increase of well over 100 percent. In addition to permanent residents, the Palm Springs-area population includes seasonal residents, adding approximately 105,000 more from October through May.

The area is expected to continue growing dramatically through the 1990s and into the next century. The total permanent population is expected to increase 38 percent to 350,000 by the year 2000 and to 505,000 by the year 2010, an increase of almost 100 percent. Riverside County's population is expected to reach 1.775 million by the year 2000, and to exceed 2 million people by 2005, with the Palm Springs area expected to grow at a similar pace.

The engine

What will drive this kind of growth over the next several years? There are a number of possible factors. They include the advantageous location of the area as a transport hub for commerce with Mexico stemming from NAFTA, the growth of jobs resulting from the area's new Enterprise Zone, and an even higher influx of retirees due to Riverside County's recent extension of Proposition 90 privileges.

Other factors that will likely serve as engines for growth are the area's desert climate and its proximity to a number of areas throughout Southern California.

Bonafede is manager of public and community relations for Del Webb California at Sun City Palm Springs