Santa Clarita Valley Real Estate

What’s REALLY happening in the local SCV Real Estate Market?

 

Let’s start with the selling side of things.

 

The first quarter of the year was dismal to say the least. Not much activity at all. Lot’s of over-priced inventory, both privately-owned & bank-owned. It seemed like no one wanted to accept reality when it came to pricing homes for sale. Would-be buyers just decided to wait it out knowing time was on their side. Who could blame them. The media was reporting record foreclosures and doom and gloom for sellers. Thank God we have an upcoming election or we’d still be hearing about it as the “top story”.

 

By the end of April we started to see this change. In fact, April had the highest number of closings in Santa Clarita for the same time period in four years! Although the downward trend in pricing is continuing, we are seeing some stabilization in some segments of the market. Most of the adjustment is influenced by the high volume of bank-owned properties flooding the market, This has had an obvious effect on overall market values, which affect all of us who own real property. This trend will no doubt continue for several months as banks try to liquidate their inventory.

 

For would-be sellers, most are just stuck. Opting to wait out more favorable market conditions rather than selling short if they lack the necessary equity or cash reserves to move on, up or out. For those that are able and willing to sell, trying to stomach what it takes to compete with the bank-owned house down the street hasn’t been easy. It simply is what it is, a paradigm shift from the glory days of the sellers market of five years ago. Yes…five years ago!

 

Now for the buying side of things.

 

This is where the real fun begins. Just kidding! While the media would like us all to believe that it is a buyers market and buyers are in control, it simply isn’t true. How can this be? Not a seller’s market or a buyer’s market? Is that possible? Yes!

 

Let me try to explain. The simple economic rule of supply and demand applies here.

 

While there is seemingly tons of supply (according to the media), it is critically important to understand what that supply consists of. Without getting into exact specifics (because there aren’t any) the supply (or inventory) of homes available is relatively small. As of 6/4/08, there were 1811 listings on the market in Santa Clarita. This is down about 30% from where we were on January 1st, 2008 and represents a 3.4 months supply of homes, a little more than half of the normal 6 months supply.

 

But wait, let’s back up. What does that inventory consist of? Let me word it differently. How many of these homes can a buyer go out and buy today without competing against twenty other offers, waiting for a bank to approve a Short Sale or having a private seller agree to their “low ball” offer? My answer: Not Many!

 

Let’s examine this further seller by seller:

 

The “Unapproved” Short Sale Seller: What is this? Simple. Bob owes $500K on property that’s worth $350K. Bob is $150K short of breaking even on the sale. Bob doesn’t have $150K in the bank to make up the difference. Bob asks, hopes and prays the bank will forgive the difference and agree to sell short. One problem, the bank most likely won’t even consider it until the home is almost in foreclosure and they have a “reasonable” offer they can work with. The thing is, Bob’s had his house on the market for 9 months, over-priced with no offers.

 

Finally, Sally makes an offer. Its low because she’s been led to believe its a “Buyers Market” and since this guys in trouble, she can get a bargain. Not! Why? Because the bank wants market value, say $450K and she only offered $350K.

 

Or the other scenario. Bob’s “unethical” agent priced the property far below market value to attract buyers and offers (under false pretenses) in hopes of moving the process along faster. Bad idea. Bob’s agent now has 50 offers, all below market which the bank will never accept.

 

To summarize, this is a scenario that literally thousands of want-to-be homebuyers are dealing with every day. Trying to buy a house that isn’t really available for the price it is listed for and waiting for a response to their offer that will most likely NEVER come.

 

Let’s look at the Bank-Owned Property Seller.

 

OK…banks have a ton of property to liquidate. True. Banks are willing to incure further losses on top of the billions they have already lost. False.

 

When banks take these properties back, they need to determine what market value actually is. This is done in several ways but primarily they determine value by having a formal appraisal done and getting several “BPO’s” (Broker Price Opinions). Once they arrive at the number and have prepared the property for market, they will list it for sale.

 

Once again, there’s an issue. Buyer’s have been led to believe that these are properties that can be “low balled”. Not true, by a long shot. The banks have already decided what price they will take and usually will not budge. Why? Because as soon as it hits the market, they get flooded with offers at, above and well below the asking price. They realize quickly that they can get their asking price if not more.

 

We recently wrote an offer for a client. She was excited. The bank-owned house was listed for $365,000. The bank was even willing to pay up to $10,000 in buyers closing costs.  By the time we had the offer written and called the agent to let them know we would be submitting it, he said “if its not at least $408,000, don’t waste your time. I have 11 offers and three are over $400,000″.

 

So our client who thought (and we agreed) she made a great offer at $10,000 over asking price, didn’t stand a chance of getting the deal. Either did 9 other buyers! To summarize all of this craziness, I look at it like this:

 

Its a Sellers Market for properties priced to sell. There are many more of these to come from the banks in the months ahead. If you are a “normal” homeowner with significant equity and are willing to list a little below recent comps, chances are you will have multiple offers. If you are not willing to be priced aggressively, don’t try to sell now.

 

Its a Buyers Market if the buyer is aggressive. This means being fully pre-approved for financing. Being ready to look at new listings at a moments notice. Being willing to make a really strong offer. Being able to fully trust what the agent representing them is suggesting to do if they want to get the property. By having all personal financial documentation ready at a moments notice in case the bank requires pre-qualifying with them as a condition of consideration of your offer.

 

If you want to buy and can play by these simple rules, you will succeed. Otherwise, don’t play and wait for about 2 more years when we will hopefully have a “normal” market. This may come with some risk as well. Interest rates are very unpredictable. There’s no telling where they will be in a couple of years. Right now, they are still historically low making it a great time to buy. For help with financing questions including tax advice, please contact Richard Lombardi of Tower Funding. His direct number is: 661-287-9120. Let him know that Evelyn Taibi referred you.

 

If you are thinking of buying or selling in todays market, one thing is certain; you will need the expertise and knowledge of a seasoned, professional Realtor to be successful. Call us today at 661-212-1135 to help you. We are extremely patient and helpful in this process and will work with you at your pace no matter how long it takes.

 

Thank you for reading this update. The comments and opinions expressed herein are those of the author and not intended to be harmful or offensive in any way. Your comments are welcome.

 

Evelyn Taibi & Associates – Your Realtors