Why the Future is Bright for Santa Clarita Real Estate

In a few months it will be a New Year and I will be sharing my review of 2016 in Real Estate, and what you might expect for 2017. Spoiler alert, 2016 was the fourth straight year of appreciation bringing many neighborhoods back to where they might have been at the height of the market 10 years ago. Some neighborhoods still aren’t there, but today over 90% of the homeowners in Santa Clarita have equity in their homes and the amount of distress sales is so low there is virtually no risk that we see any kind of a major adjustment in values. Yet, because of a Trump election and a market that seems overheated to many, I’m being asked more and more if an adjustment down in values is likely? The short answer is “no”, but why? Why will our valley perhaps even outperform other areas in California? The answer lies in some fundamental changes that were put in place years ago by a number of forward thinking leaders. These changes broadened and diversified Santa Clarita in almost every area economically and this year end post will share some things you probably didn’t know about our valley, and the why future is bright.

In the early 1990’s, we learned the hard way that jobs and confidence in those jobs was at the core of people’s motivation to buy a home. I started my Real Estate career in 1991 and for 7 straight years we had either a decline or no appreciation in values. It was almost entirely due to jobs, especially in aerospace and manufacturing, leaving the area. That market was also a market in which distress sales existed, though not nearly to the extent of 2006-2012. Remember, 2006-2012 was an anomaly that won’t happen again or even close to it. Why? Because Real Estate values have always been based on supply and demand, and as I will explain here demand for our valley will continue to grow for years to come because of the fundamentals. The keys to appreciation are jobs, interest rates and economic growth in an area, not funny money loans and rampant speculation with no basis in reality. Today, we have neither the speculation nor the easy loans available that drove the crash of 2006-2012. People that can’t afford loans can’t get them today, and that won’t change even if our new President loosens some of the laws. Further, the large amount of homes available 15 years ago has been replaced by a complete shortage. Our inventory in Santa Clarita in 2004-2007 averaged 2000 homes for sale. The last 4 years we have averaged about 500. Still, this last year has seen a slowdown in both the number of homes sold, and the strong appreciation that we experienced in 2013-2015. Many buyers can’t afford today’s prices. If interest rates go up, which is likely for a number of reasons, couldn’t that cool off the market and even lead to price decreases? In the short term it could. In the long term though, values are likely to stay strong and continue to appreciate in Santa Clarita. Here is why:

There are a lot of basics in place that if taken care of, will keep Santa Clarita strong. At the top of the list are outstanding schools and safe neighborhoods. We have our excellent teachers and law enforcement to thank for that, the majority of which live here and have a vested interest in maintaining it. Quality of life is always at the top of a homebuyer’s list when deciding where to raise their family and in all surveys, Santa Clarita shines. People want to live here, move their business here, take a new job here. They want to stay and buyer a bigger/smaller home here. But we had great schools and safe neighborhoods in the 90’s, so what’s better now? Simply stated, our job base. Years ago our city began a concerted effort to draw strong business with good paying jobs to our valley. That was our weakness in 1991-1997? That decline was fueled by TWO major employers leaving the area, Baxter and Lockheed. Today our valley is home to major companies in 7 different sectors at a level never before seen. Entertainment, Tourism, Health Care, Bio Med, Medical Devices, Internet marketing/Digital Media and a much broader manufacturing/Aerospace base have all blossomed here. The service/retail sector is much stronger as well. None of these sectors has more than 18% of the existing jobs here. Due to the efforts of our College, City leaders and the SCVEDC (Santa Clarita Valley Economic Development Corporation) all working together to attract new and diverse business, Santa Clarita was just named the #1 city in Los Angeles County for being business friendly. This is just the beginning with a lot more to add to names like Logix, Princess Cruises, Boston Scientific, Sunkist, Disney Ranch, Scorpion Design, Santa Clarita Studios, Quest Diagnostics, Windward and others. No longer can one big aerospace company leave and change the housing market for 2 years like in the 90’s. Santa Clarita has a strong diverse economy that will continue to fuel our housing market. Just look at film as a fun example of Santa Clarita really making progress in the last 20 years. To say that we have become “Hollywood North” is no joke. This year, we have 233 filming days, up 28% from last year. TV, movies, ads, video’s – we see it all here. The economic impact is over $70 million year-to-date. Because we are within the “Thirty Mile Zone” (TMZ), this part of our economy has exploded and we have the stages and natural topography to support a lot more growth in this area. The same can be said of all the sectors – when Advanced Bionics and Boston Scientific became growing community partners here in Santa Clarita, it attracted other similar business. This is what the SCVEDC really does an aggressive job of – attracting businesses of this type that offer desirable, high paying jobs here in Santa Clarita without a big commute involved. Health care has exploded in our valley and as the valley grows (our population is projected to basically double from 215000 to 450,000 by 2050) expect this area to really grow with it. And the list goes on.

In the 1990’s, you could argue we didn’t have the labor or the physical space to support a large, diverse business economy. Neither are true today. College of the Canyons in 1990 started a job training program that today is the envy of the Community College system. Partnering with local businesses to train their employees, these programs cover a huge cross section in both manufacturing and the service sector. Check out their new culinary institute, the food is incredible. Measured by salaries at completion and number of adults going back to college, COC is nationally recognized. We can thank the strong leadership at COC for starting that 25 years ago, today it is an attractive partner to companies looking to relocate that need skilled labor. Also, after years of a tight commercial/industrial market, 2016 brings us over 8 million square feet that is desperately needed for companies that want to move here. In the past, when companies expressed interest, we didn’t always have a place for them. This year that changed with 5 distinct business parks offering space for small to mid-size companies. These are new, well planned, energy efficient buildings, usually much better than what is available elsewhere in the city or Valley. Until recently, availability inventory has been less than 2%. Talk about a tight Real Estate market!

Finally, with the desire of both families and businesses to relocate to Santa Clarita, we need to have more homes available. I encourage you to google “Net Zero Newhall” which is the just announced plan for the long delayed Newhall Ranch. This development which has been in the works for years, will be the first master planned community of its kind. It will be water and energy efficient at a level never before seen to meet the State of California’s ambitious goals. Every home will have solar, an electric charging station for vehicles, all water will come from existing wells and be treated by its own water reclamation facilities paid for by the developer. There is a lot to share and certainly not everyone loves the idea of 16,000 homes off the 126, but this is incredibly well planned & designed, and will be the envy of the building community. With a strong business community, an attractive median income of $92,000, a growing population and an organized group of leaders with a common vision, Santa Clarita looks like winner for long term Real Estate appreciation!

Why 2016 isn’t 2006…but it may still be the time to sell

Recently, I was discussing the market with a client and he was worried. “This market just seems….unsustainable,” he said. To be sure, 2016 has been better than expected for most. The market is red hot under $500,000 in Santa Clarita. There are so few properties, especially detached homes, for the amount of buyers waiting, it’s laughable. In the last 90 days, the higher price points of Canyon Country (over $600,000), Saugus (over $700,000) and Stevenson Ranch (over $900,000) have joined the party, with some of the highest numbers in years. Pretty much everywhere in Santa Clarita there aren’t enough quality homes under 1 million. Over that price point is a different story, but under 1 million? Universally, it’s pretty strong. So why was he worried? This is a homeowner, like many in our valley that remembers what happened in 2006-2012. Simply stated we went from a 100% sellers’ market in 2005 to a 100% buyers’ market in 2 years. Prices dropped so much that many neighborhoods are still 20% away from their peaks. He barely held onto his home. He remembers the almost silly euphoria of a market that seemed to have no possible chance of ever correcting; prices seemed to just naturally continue going up and never stopping. Like most of us, he knows that isn’t how Real Estate works.

My client isn’t alone. I have had more people, including Realtors, comment with concern that we MUST be nearing a peak. After all, we have 3 years of straight up appreciation. It will end, wont it? Yes, it will. And there may be a correction of some size when it does. It always happens that way, especially in California where the highs are really high and the lows really low. With all that said, there are virtually none of the factors in place to cause any kind of major correction in the market and I see no reason why the market under $500,000 won’t continue to chug forward in Santa Clarita and most other parts of California. The supply/demand equation is completely out of whack and there are ample buyers that can afford that price point. Affordability becomes a bigger concern over $500,000, but here is why we aren’t anything like 2006 and any correction that comes is likely to be small. First, 2006 was based on funny money loans, investor speculation and factors that not only don’t exist today, they couldn’t. No one has gotten a loan with nothing down that they can’t afford. Next, if some economic issue affected jobs or interest rates (the two biggest normal factors that cause a slump), virtually everyone has equity in their homes, unlike 2006. If they have to sell, they sell and get money. They don’t walk away. That is a BIG difference. Last, rents are so high that if someone didn’t have equity and couldn’t sell at a good price for a few years they can almost always rent their home out and cover their payment. There are many people in Santa Clarita that have done exactly that over the past few years waiting for the market to improve.
So, it’s safe to say we probably are near a peak. Whatever correction we experience will be small or nonexistent under $500,000. My friend owns an $800,000 home. Should he be concerned? It depends. He lives in Northbridge Valencia where the supply/demand equation is also out of whack. Multiple offers are common place and the market defines “frothy”. This describes Fair Oaks Ranch, Stevenson Ranch, parts of Saugus and Castaic and a number of other popular areas in our valley. I would say to many of those people though, that if they are planning to sell I would look VERY carefully at sooner than later. My personal experience is that I have literally hundreds of clients that currently own homes larger than they need. I sold them these homes 10 or 15 years ago and the kids are gone. They don’t need that large a home anymore. But they aren’t selling. Some don’t know where they want to go, or they do but there isn’t much for sale. Or they just aren’t ready to let go. These are all good reasons. Some, however, are waiting for the market to go even higher, and that is where it gets dangerous. You can’t time these things; we’ve certainly learned that. In many cases, money and getting the highest possible price is a big concern. That is certainly understandable but the value of their property hasn’t been this high probably since 2006. No one can predict the future, but history does teach us that the appreciation will stop at some point. Maybe even take a step back. To that group of homeowners, it likely makes sense to make that move sooner than later. It’s tough sometimes making a move you aren’t 100% ready for. It’s tougher to try to make it when you have to and you are competing against dozens of homes instead of 2 or 3.

Inventory Tight, Prices Rising…and Some Homes Still Aren’t Selling?

If there is one thing that continues to smack me between the eyes about Real Estate, it’s that timing is truly everything. In January’s New Year blog, I suggested that 2016 should be a strong year for some sellers because of all the fundamentals – lack of inventory pushing up prices being at the top of the list. I expected, especially in the under $600,000 market, that we could easily see another 5-6% appreciation like we experienced in 2015…and we already have that. Ironically, we actually are behind 2015 April Pendings by about 20%, because of the lack of inventory. This is creating a strange and unusual occurrence in the market. Many people with nice starter homes aren’t selling them, even though they would like to, because there aren’t many available homes to move up to. So they just stay put. Many people with larger homes, with kids out of the house, are ready to downsize. But we don’t have the smaller homes, and especially single story homes that would potentially interest them. So they just stay put. Those that are pursuing moving in a tight market are loving the reaction they get as a seller, and not loving trying to buy in a tight market. The first time buyers are driving the prices up of starter condos and small homes like it was 2004, with multiple offers happening on about anything in decent condition. And because sellers of these properties are fighting over limited quality homes in the $500,000-$800,000 range, that part of the market has caught fire too.

Here are some examples from the first quarter. Condos in parts of Canyon Country that you practically couldn’t give away a few years ago, sell immediately. The 2 bedroom plus loft on Sierra Highway that was at $210,000 last summer is today $250,000. The townhome in Valencia Northbridge that was $325000 last summer is today $370,000 and good luck finding one. In Santa Clarita, if you want to buy something under $300,000 many agents will simply say they can’t help you. For the move up buyers, what was $735,000 in that same Northbridge Valencia area last summer (5 beds and a pool) is today pushing $800,000. In fact, I just closed escrow on 27306 Blueridge at $825,000. It is one of only two sales over $800,000 in the last 2 years, but it won’t be the last. Its been years since homes like that were over $800,000, but they are again, at least for now. Even more head slapping is the Copper Hill North part of Saugus. Last summer there were over 20 homes for sale over 2,500 square feet. Many were on the market over 60 days. Many had to reduce their price to sell. Some didn’t sell and came off the market. Those same homes if they come back on the market now would find only a few homes they compete against and likely sell with virtually no changes in condition or price….simply because they compete against so little compared to last summer. So, as they say, timing is indeed everything.

So why are some homes still sitting, sometimes for months at a time? That can be even more head scratching! In my discussions with other top agents, they have described this market as “weird,” “unpredictable,” “erratic” and my personal favorite “I don’t even know what to tell sellers over $800,000 anymore.” And I’m getting this from agents all around Southern California too. In short, if you have a home in Santa Clarita under $800,000 and it isn’t getting offers, you are either in a weird pocket where there isn’t much demand or there is a problem with your condition. If you are over $800,000 and especially over $1,000,000, the market can be tricky. Sometimes, one home in a neighborhood will sell immediately while others sit for months. In the same neighborhood! A perfect example came last month when I put a single story on the market in Circle J at $1,150,000. There were 5 others on the market, many for months, all without having seen offers. My single story had been on the market before with other agents and hadn’t sold. With a few small changes we sold at almost asking price in 10 days. How would you like to be those other 5 sellers wondering what the heck just happened? On the flip side, I have a terrific Westridge view home for sale at $999,900 with plenty of showings. Four agents have called me stating they expect to write an offer and not one has. Because of the lack of competing homes, it wouldn’t surprise me if I bring the seller two offers out of the blue…or that it takes me another 6 weeks to sell it. It’s just that unpredictable in this part of the market. Buyers looking, maybe not always offering. I am seeing this finally start to change though. There is so little for sale in Stevenson Ranch that homes that would have been $750,000 6 months ago are coming on the market at $850,000. I’m showing them because there isn’t anything else to show our buyers! Are they overpriced? Maybe, but if they sell, maybe not. The sellers of those starter homes that are buying and driving up prices in Saugus in the $700,000+ market are starting to be seen in the slightly higher price points of Westridge and Stevenson Ranch. Again, timing is truly everything, and in the over one million market, patience may be mandatory.

Will 2016 be as good as 2015 in Real Estate?

Sometimes in Real Estate you can look at the fundamentals – not enough homes for sale, agents trying to find buyers homes without success, continued low interest rates, great new loan programs, higher rents that should be driving buyers to purchase… and conclude prices should go up this year. I fully expect that to happen in many parts of the market, following the 6% appreciation we saw for SCV in 2015.

However, the second half of 2015 was much slower than the first half in terms of new sales, including in new construction. In the higher price points of Santa Clarita, over $750,000 and especially over $900,000, the last 5 months have seen significantly less foot traffic, offers and sales. That isn’t terribly unusual but it’s been so much slower that even the LA Times commented that it was happening all over Southern California and they couldn’t conclude whether it was a lack of affordability, or a lack of inventory. I would like to suggest it is a bit of both, being that today’s buyer is more educated than ever and increasingly unwilling to buy a home at higher prices just to buy a home. To understand better what we might see in 2016, here are 3 trends happening as we speak in the marketplace.

First, there are parts of our valley right now that have so little for sale that sellers waiting for the “Spring selling season” are making a mistake in waiting. The conventional wisdom is that there are more buyers out looking in Spring and sellers want to wait for that. I can’t disagree with that IF you have a move-up buyer home, especially in the higher price points that have been so slow. HOWEVER, I have spoken to dozens of would-be sellers these first few weeks of the year and begged them to list now because there are virtually no homes they compete against. And there are buyers, though maybe not as many as in 2 months, out there. As a seller, would you rather compete against 2 homes or 7 or 8? When you study the trends of inventory going up and down, it is so obvious to see that the main reason sellers have success or failure in most parts of our valley is due to what they compete against, not what month of the year it is. The most obvious example right now is a part of Saugus we call “Copper Hill North.” These are homes over 2300 square feet, newer, that sell between $575,000 and $750,000. There have been times in the last 12 months where there would be 15-25 homes for sale and even nice homes would take 45-90 days to sell. Today, there are 6 and I get calls and emails from agents daily looking for a nice home in this area for their motivated buyer. I sure wouldn’t wait until April if I had one of those, there could be another dozen homes to compete against by then, and probably will be.

Second, today’s buyer is more educated and conservative than ever. To a seller this means that just because you don’t have a lot of homes to compete against, potential buyers won’t pay the price of a fully upgraded home if yours hasn’t had that done to it. In today’s market, homes will sit if they are mostly original but priced like the upgraded competition. The good news is that if you have put a lot into your home, buyers will recognize that and pay a premium. That hasn’t always been the case in the past. Also, today’s buyer will rarely buy the top dollar amount they can afford. It is completely common for me to have a buyer that qualifies up to $700,000 but won’t buy for more than $600,000. What all of this means in 2016, is that knowing how many buyers are out there when you put your home for sale, and what they want is more important than ever. Further, as I said last year, the best buyer in today’s market remains the seller/buyer. That buyer is selling a home and either moving up to a larger home or down to a smaller one. In 2015, half of our buyers were this type of buyer. That trend likely continues in 2016. If the market doesn’t heat up, knowing who represents these buyers, and getting them in your home, will be crucial for sellers in 2016 to have success.

Third, because the seller/buyer is so important in the Santa Clarita Real Estate market, and because what is hot in January may not be as hot in June, and because these inventory cycles are so unpredictable…..sellers willing to do a double move before buying will truly have the best potential to “sell high and buy low.” Here is what I mean. Many seller/buyers want to sell and move right into their new home. No one can blame them for that, since moving into a temporary situation is a hassle and an extra expense. However, many sellers that will only sell if they can buy simultaneously, can’t time the whole selling/buying process to their advantage. Meaning, they may have a buyer but no home they like at that exact moment, and their buyer goes elsewhere. The seller that wants to buy in that tough Copper Hill area could sell now at top dollar, do an interim move, wait for more and better inventory to come on the market and maybe even negotiate the price down on a better home. If they sell and attempt to buy now they could easily be up against other offers. If they sell now, but wait for the inventory to go up, AND IT ALWAYS DOES, they can truly sell in a hot market and buy in a more balanced one, taking advantage of the timing. I am seeing more and more seller/buyers do this and it is giving them a better home, a better buying experience and thousands of dollars in their pocket.

Understanding these three trends can help you navigate what should be a solid 2016 for sellers and buyers alike. Why some homes take a long time to sell, or have to reduce their price, can usually be explained by understanding these trends.  2015 was for me and many other agents one of our best years in Real Estate. 2016 can be the same if we pay attention to what is happening and take advantage of what the market offers. Happy New Year!


In Santa Clarita, if you want to buy a property under $400,000, over 80% of your choices will be condos and townhomes. Historically, most of the buyers for these properties have been first time buyers with the majority using FHA loans to purchase. FHA loans are popular for two reasons: First, low down payments (3.5% down) and Second, lower credit scores (low 600’s) can still get you a loan. FHA buyers have powered our entry level market for years.

FHA loans do come with a catch. The complex the subject property is in has to be “FHA approved,” meaning a detailed review is conducted of the HOA financials and a whole host of other things before deciding whether they want to loan there. At one time, virtually every complex in our valley was FHA approved. These approvals however have time limits and have to be re-approved every few years. For a variety of reasons, dozens of complexes in Santa Clarita have lost their approval. Often it is because the HOA board doesn’t understand, or see the need to spend the money to get re-approved with FHA. Sometimes they just don’t want to deal with the Government paperwork. Other times the rental rate in the complex has become too high (over 50%) for the FHA to continue loaning there. The net result for homeowners in those complexes is a huge reduction in potential buyers and a loss in value. Most homeowners don’t have a clue how big a deal this is until they go to sell and find out their complex lost its approval – in many cases within the last 2 years.

This is not only a problem for the owners of these properties facing a loss in value, it’s also extremely frustrating for buyers who want to purchase but are shut out because the only loan available to them can’t buy them what is available in their price range. The majority of these buyers just don’t have the 10-20% down payment needed to get a “conventional” loan, and conventional loans often limit the assistance from family (“gift funds” or “co-signing”) that would allow them to put more down. This problem, however, is about to be solved by 2 new lending programs coming available next month that are truly gifts that both buyers and sellers may find the best gift they get this Holiday season!
These new loan have so many terrific qualities it’s almost hard to imagine and I believe will not only spur the entry level market, but the move up market from $400,000 to $700,000 as well. First, for buyers with a purchase price up to $427,250, they can put a minimum of 3% down.  For buyers above that price point, the requirement is only 5% down which is also a low down payment loan to help first timers. Next, the loan amount goes up to $625,500, which is huge in areas like Southern California where prices are high. Further, unlike expensive FHA loans which have huge up front closing costs (in most cases about $10,000 to get the loan before you get in) and monthly mortgage insurance on top of that, there is NO MORTGAGE INSURANCE that many buyers consider money flushed down the toilet each month when their credit is stellar. Your credit has to be good (above 700 FICO), but if it is, you are in business.

But wait, there is more! The down payment can be a gift!!  For parents of Millennials, like me, that want to help their children avoid sky high rents and enjoy home ownership this is a low cost loan that I can help them with, that avoids excessive fees and is at today’s low market interest rates. Even better, family members can also co-sign to help get the loan! Because it is also a traditional Fannie Mae loan, you can get it from virtually any lender. It becomes available December 12! For a number of years when the market was soft, people would say to me they thought it was because loans were so hard to get. In most cases that was a small reason why, but it was more due to declining values. Today, it is soft even when we have a lack of inventory to spur buyers and sellers, in part because many don’t have an available fairly priced loan product – especially for first time buyers and first time move-up buyers. This new loan changes that. Happy holidays!

Are you paying too much in Property taxes??

Every year, I can gauge what is trending in Real Estate by the questions I get from all of my great past clients. Property taxes are at the top of the list, mostly because they want to know if they are being properly assessed, how they are assessed and what their new taxes will be if they move. These are all easy questions to answer individually, and I am always happy to get them “comps” (recent sales like their home) to understand why they pay what they pay, and if it is indeed too much. Honestly, it’s rarely too much based on market value. Until this year when I learned something I never knew before.

To explain, it’s important to understand how our taxes are determined and changed when we go through a decline in value as we did in 2006-2012. I will keep it simple. There are always small exceptions to the rules but this will cover 98% of us. We all pay taxes based on what we paid for our house. If you bought your home in 2005 and it went down in value, you can file a form called a “decline in value review”, provide sales supplied by your friendly Realtor, and your taxes were reduced after being reviewed. I’ve helped hundreds of people do this. The idea is to pay taxes based on “market value”, not necessarily what you paid for the home if values did decline, which of course, they did. I recently had the opportunity to meet with new LA County tax Assessor Jeffrey Prang. Nice guy. Wants to bring the County’s outdated computer systems up to date and improve accuracy in valuations. Which, when I explain what is happening with the tax bills we all will receive by November 1, I suspect you will want that to happen too!

A lot of how your taxes are determined goes back to the old Proposition 13 that still affect what you and I pay today. In effect since 1978, most people think it allows people who live in their homes for a long time to not pay current valuations so they can “afford” to live there. This is certainly true. Proposition 13 specifically states that property taxes can be raised only 2% per year. If you bought a home in the 70’s or 80’s, and still live there today, you are likely paying taxes at a small fraction of today’s market value. If I sold you a home in Northbridge Valencia for $350,000 in 1997, you paid 1% of that $350,000 as the base rate for LA County and approximately another .25% for the “supplementals” that we all pay – for fire, flood, library, sewer etc. Everyone’s supplementals can vary a bit (especially if your neighborhood has a landscape district or even worse, expensive Mello Roos bonds), but we quote taxes as “1.25% in LA County”, and it’s pretty accurate. So that house you bought in 1997 had a base rate of $3,500 a year in property taxes, and if values rose (which they did, that house today is worth $700,000), the MOST your property taxes could go up is about $70 a year. Again, it’s design was to avoid taxing people out of being able to afford their home, even if the neighbor that just purchased is paying almost double. Everyone accepts that is what Proposition 13 provides.

What Prop 13 also says however, is if you had a decline in value and reduced your taxes over the last 8 or 9 years, when value go up again the 2% rule DOESN’T APPLY. In fact, according to Jeffrey Prang, the assessor is in the middle of restoring taxes in most cases to pre-recession levels, which may be fine if you live in Manhattan Beach or Silicon Valley. It will most definitely not be fine for many people in Santa Clarita. And that is exactly what came up on my radar this summer when clients called with their new valuations, which weren’t even close to what market value is. One client bought a triplex from me for $700,000 at the height of the market in Newhall. He had his taxes reduced in 2008 to a realistic $475,000, which was the value at that time. They’ve come up a bit, but still were assessed below $500,000…until this year. Market value today is about $625,000, but he has been assessed at $810,000! Worse, after examining why, they are using properties from the San Fernando Valley when properties in Newhall exist, they just aren’t using them! Another client with a home in Valencia had the assessed value raised from $565,000 to $880,000 and that isn’t close to current market value – which is about $700,000.

When I questioned Mr. Prang about this, he admitted that they use “averages” for areas to come up with values. Meaning, if they use the wrong homes to “average” you can be assessed to pay a lot more in property taxes than you should. Further, they have a 40,000 case backlog of appeals for new valuations already and you have to pay the new value until your dispute is resolved. Further, the amount of appraisers employed in the Sylmar field office is a fraction of what it needs to be, so it will likely be awhile before you can have your appeal reviewed if in fact your valuation is now TOO HIGH for today’s actual value. When I questioned him about using properties from 30 miles away when comps within a 2 mile radius were available, he admitted “that shouldn’t happen”. So here we go again, watch what your new tax bill says. If you had your taxes reduced in the last 9 years due to decline in value, REALLY check your new assessed value. If it is out of line, I have the forms in my office.

Where the market is Hot…and where it’s Not!

As we hit the midpoint of the year, some of what I suggested in January has indeed come to pass. For the most part, the market is healthy with low-interest rates having helped entry-level buyers enjoy home ownership.  Even the high-end has seen some of the highest sales in the history of Santa Clarita. Because buyer confidence is so important to a steady market, the media is helping when they report rising prices, not enough homes for sale, stronger job markets and modest increases in income. Yet, it is assuredly not an across the board, “My home will sell for more than my neighbor’s just did” market. This report will very clearly tell you what is hot and what is not…and how fast it can change.

One of the strongest signs that Real Estate has come all the way back in the last few years is obvious in the non-residential side of the business. Though I rarely report on commercial properties, apartment buildings and shopping centers; that part of real estate has REALLY come roaring back. Because investors look at those properties with a very logical eye, it is all about the return on their money. The emotion which plays such an important part in residential Real Estate really doesn’t exist. So when I tell you that investors are gobbling up properties throughout Southern California with the lowest returns I have ever seen in 25 years of selling homes, it means something. And what it means is that they are betting on future appreciation and they believe with multi-unit properties that rents will continue to rise. So far they have been correct, as rents are up 10% YTD in most areas. Vacancy on retail, office and commercial buildings is also at very low numbers from a few years ago and this whole segment of the Real Estate business is definitely HOT. With residential homes though, it’s a little trickier to explain. For the most part, I would describe this market as strong but erratic. Certain pockets where inventory is low can expect a terrific response from buyers just waiting for something in “that neighborhood” however, in other areas, not so much. Read on for what is, and isn’t…”hot.”

Keeping it simple, it is safe to say that if you have a single family home in Santa Clarita under $475,000 you have plenty of buyer prospects and probably very few homes competing against you. At the end of the day, that’s what defines a “hot” market. Everywhere in Saugus, Newhall, Canyon Country and Castaic is strong in these price points. Every day we see multiple offers in this segment of the market and when I tell fellow agents I have a 3 bedroom Valencia Sunrise coming up the calls begin immediately. That type of property that was maybe $385,000 a year ago can expect offers closer to $450,000 today. The numbers aren’t quite that strong everywhere in Santa Clarita, but the more popular tracts in our valley enjoy the same double-digit appreciation and interest. I don’t see that changing anytime soon.  Because prices are rising here, the number one thing to prepare for is the appraisal and how you are going to sell when your home may not appraise for the price a buyer is willing to pay. Smart agents are getting them closed and that is keeping this whole segment “hot”.

With our attached homes, it’s mixed.  For townhomes (no one above or below, attached garages, small yards) the market is “hot” under $375,000. Condos, especially older units, don’t enjoy the same interest, but still sell when priced properly. There are 130 attached homes for sale in Santa Clarita and 140 in escrow. That is a sign of a healthy market, but not “hot,” especially if you are one of the 130 sellers vying for buyers.

The $500,000-700,000 price point is trickier and very neighborhood specific. A highly upgraded home in newer Castaic or Saugus with a great yard can sell quickly, but not always. Valencia and Stevenson Ranch? Maybe, but not if the home has high Mello Roos or objections to condition or location. Not everything just sells here, and that is sometimes hard for homeowners to understand. The trend that started one year ago, that homes were taking longer to sell in this price range, continues today. Here buyers and sellers are much more in balance, and if you are considering selling, timing is everything. Here is where my comment about “erratic” comes in. In March, I could list a 2700 square foot home in Saugus for $600,000-675,000 and have maybe 3 or 4 homes to compete against. If it was sharp it might have multiple offers. Today, there are 3 times as many homes for sale and that same home might even sell for a bit less than in March because of the competition. For this reason, if you plan to sell in this range the number one thing to evaluate is how many homes you compete against. In many neighborhoods, sellers out number buyers. That means “not so hot”. You will still sell, just not as quickly as and maybe not for more money than the last one like yours. And if there are 6 or 7 competing homes, you may need to price at or below the last sale to insure offers. This is VERY different from the lower price points. The last tip here is for some reason MANY sellers waited to put their homes on the market until June. I don’t know why. If you are in this price range, realize that buyers that want to move around a school year start in March, sometimes February. Give yourself the competitive advantage of being on the market when the competition is lower and the buyers are stronger. We had a strong March. We expected it to continue into April and May. It didn’t. That is why you see so many homes that have reduced their prices in the last 45 days.

Over $750,000 is truly reflective of a mixed bag. I am happy to report that I was able to sell the highest priced home in the history of Santa Clarita in March, a $4,000,000 Westridge custom. Another record sale happened with an incredible property in Southern Oaks. The larger Woodlands homes are in high demand and all the agents know who has buyers for them. Larger homes in Northbridge & Northpark are in high demand as well. I would describe all of these markets as “hot” for what some call “trophy” properties (the best location, the biggest lot, the nicest upgrades). But what if that doesn’t describe your home? After the 4 million dollar sale, a number of sellers tried prices considerably higher than before it…and none have sold. Does that mean Westridge customs aren’t hot? Not necessarily. The under 2.5 million price point has buyers waiting for new listings. Knowing where the market is strong and where it isn’t is really something you have to track daily, because it can change quickly. Stevenson Ranch had a similar experience over the last 60 days. I listed a 3600 square foot pool home in March that I had difficulty selling a few years ago because it backed a busy street. The sellers were ready to try again and we determined $899,900 was “top dollar”. 10 showings and 4 offers later we sold for $925,000 with no appraisal contingency (the home would not have appraised at that price).  Every home listed since has tried to piggy back off that sale with little or no success. Today there are more than double that many pool homes, and they aren’t getting the same attention as in March. Does that mean that pool homes in Stevenson Ranch aren’t hot? Well, it depends on what you have. There is no questioning though that the confidence buyers and sellers had in March is different today.

To sum up then, be thankful for a market that is strong and reasonably steady. It’s almost hard to believe that just a few years ago prices were going down, not up. Almost no one tried to sell in the higher price points unless they had to. Today they can and do if they are patient. We still don’t have enough homes for sale, which means many homes will continue to be well received when placed on the market. Just don’t expect that everything is hot and that what is hot today will still be hot tomorrow.

2015…better than we think?

For 15 years I have started the New Year with a review of the previous year and some trends I am noticing that will affect the year ahead in Real Estate. Before I write to you, I read and study a lot of information before summarizing what I think we may see. It always strikes me how easy it is to argue either way. I’ll skip to the good part. I expect 2015 to be better than a lot of experts think, and even better than I would have thought 4 or 5 months ago – and it isn’t just because of low oil prices and interest rates staying at rock bottom.

First though, a synopsis of 2014 and why the Wall Street Journal described housing as “the biggest disappointment of the economy in 2014”. There were a lot of expectations for 2014, and in many ways it wasn’t as good as expected. First, transactions were down about 10% from 2013. This is true for Santa Clarita and California as a whole. Many would be sellers had to reduce their prices to sell, or gave up entirely. Homes took much longer to sell, painful for sellers and agents alike. Prices didn’t rise the way some sellers hoped. Low interest rates failed to attract the first time buyer to the market. Candidly, of these, only the lack of the first time buyer concerns me. Transactions were down because foreclosures are almost back to pre 2005 levels – that’s a good thing. If you want price stability, or appreciation, foreclosures are the enemy. Sellers having trouble selling had to do with confusion about “real” value (honestly, Zillow is rarely a proper estimate for your home’s true value) and simply not understanding that this market still does not have enough real buyers in many price points to justify asking continued higher prices, UNLESS it is of superior condition or location. The homes that didn’t sell in 2014 weren’t.

The lack of the first time buyer is worth our attention, though, especially in Santa Clarita where this buyer has always driven multiple transactions for people wanting to move up or out. Dubbed the “millennial,” this buyer is 25-34 years old and less than 40% of them own a home. Tellingly, over 90% of them WANT to own a home. Paying increasingly high rents (predicted to go up another 4% this year), or living with mom and dad has lost its glamour. The problem is, most can’t afford today’s prices, even at the lowest interest rates in our history. Because my children are entering this demographic, I am keenly aware that it isn’t just student loan debt or lack of a proper down payment, it’s affordability keeping them out. Consider, in 1997 the median home in Santa Clarita cost about $240,000. Today it is close to $500,000. Further, though the cost of a loan is much less (it better be!), incomes are still actually below what they were in 1997 in relative terms. So homes cost twice as much with not quite as much income to afford them. That is why you are reading about Obama reducing the cost of FHA loans and new products like 3% down low-cost loans being approved by Fannie and Freddie – we need them. And I have no doubt this will stimulate the condo market in 2015. Lower cost means more purchasing power, means more buyers, and means strength in that market. Affordability is still a concern, but strength in the lower ranges where first time buyers start can stimulate the middle and higher price points of our valley. Even if it is just a small percentage of them able to now buy.

So why optimism? Let’s start with something that isn’t always easily quantified – confidence. The news is all about how the economy is improving and consumer confidence being up; though this doesn’t mean everyone can or will buy a house, the psychological impact is important. Buyers want to know that their purchase will retain or improve its value. I can tell you just from answering the phone, buyers have this confidence. Further, they seem to have more urgency than in 2014 – they want to buy IF they can find the right thing before prices or interest rates go up. Also, though 2014 didn’t set the world on fire in terms of volume or price, it did signal to everyone the end of the distressed market and clear stability with pricing. Buyers don’t worry about that anymore. Further, if people need confidence to get into the housing market, we have that with an all time high in the Dow (hello fatter 401k’s), and unemployment at its lowest levels in 6 years. Employers are saying that incomes will rise in 2015. In my 25 years of selling homes, nothing changes a market-up or down-like job confidence and income.

Next, as some of you know, low interest rates are key to affordability and stimulating the buyer pool. For years after the financial meltdown the federal government pumped money into a bond buying program to keep rates artificially low. Many of us were concerned for what would happen when it finally went away. Well this happened in 2014…and rates went down! There are many reasons for this, but nothing points to interest rates going up in the short-term, especially if the US economy leads the world, as it does currently. Last, inventory started going up in 2014….and stopped. Traditionally, higher inventory means flatter prices but I can tell you there are plenty of price points and neighborhoods in which we don’t have enough for sale and demand is there. There are only 527 homes for sale in Santa Clarita and if we can get a few hundred more good things are certainly possible. Those sellers that listed quality properties in the last 4 months of 2014 experienced some of the strongest sales in years in Southern Oaks, Westridge and Sand Canyon. Nothing crazy, but the beginning of what may be possible in 2015. Currently we don’t have enough inventory for the buyers ready to purchase! In the over 1 million price point, there are currently 28 homes for sale, half what it was a year ago. Simply stated, high quality homes are ready to get back to values that will cause owners to sell if properly staged and marketed.

Finally, Santa Clarita as a whole will continue to attract buyers from outside the area and people who want to continue to live here. Once again, we are named one of the safest cities in the US. Tax revenues are up – filming alone was up 31% in 2014, with more to come. Expect the expansion of the medical and high-tech industries to continue in 2015 and beyond. New construction is drawing attention again, stimulating activity and putting new listings on the market from move-up sellers. In fact, if all of these trends continue and people that have wanted to move finally put their homes on the market, it wouldn’t surprise me to see both the number of transactions and prices go up across the board in 2015.

What to Expect When You’re Expecting…to Sell Your Home!

When a market changes from a strong seller’s market to a more balanced one, it can be difficult to know what will happen when you list your home. In March, 65% of listings sold in the first 45 days, today that number is 35%. Inventory is up, buyers are taking longer, condition & pricing has become more important than ever and subtle changes are occurring in the negotiation process. In other words, “Be prepared!” This Q3 Real Estate update is going to cover some very recent shifts in the market and hopefully prepare you for what to expect if you are planning to sell your home in the next year or two. Simply stated, a lot of the rules for sellers have changed in the last 4 months, and a lot of us think these trends will continue for a while as we deal with a market described by many as more “normal.” First, inventory has gone up to almost 800 homes for sale. That is double what it was a year ago. Because of this, homes are taking longer to sell in all price ranges – in some cases a lot longer. Further, once homes are in escrow, they are falling out at a rate that we haven’t seen since the decline of 2007-2011. About 16% of the homes opening escrow in the last 4 months have had to open a new escrow with a new buyer after falling out, and that number is rising. Last, we have seen over 500 price reductions in Santa Clarita in the last 5 months as sellers and their agents attempt to find what buyers will pay in today’s market. Yet, as I explain to potential sellers every day, just because homes are taking longer to sell doesn’t mean prices are necessarily going down. And just because homes are having price reductions doesn’t necessarily mean homes in your neighborhood are going down in value. It simply means that, more than ever, you and your agent have to understand how these changes apply…to you.

There are a lot of headlines recently about “slowdowns,” a lack of strong & qualified buyers to drive our market and even questions about a “bubble” that will cause prices to drop. Well, there are fewer buyers in general. My theory is that a lot of people bought in late 2012 and 2013 when they perceived that the bottom of the market had come and gone and they better buy before prices went up. I personally helped dozens of buyers that had been waiting for “the bottom.” Also, because of the appreciation of 2013-2014, there is no doubt that many potential buyers simply can’t afford today’s prices. So the buyer pool is likely smaller. However, even with all the price reductions of the last 5 months, we still aren’t looking at any “bubble” in Santa Clarita. 800 homes is less than a 3 month supply and we would need about 1500 homes to have a 6 month or “normal” supply. What we have, then, is a market in which neither buyer nor seller has a clear upper hand in most cases. Great homes still sell with multiple offers in the first 30 days, especially if they are the best price and condition for their area. Conversely, homes that have a lot of competition when they list, or aren’t in show-ready condition will likely not sell quickly as they might have in the past. Here are some examples of things happening in today’s market to be aware of before you attempt to sell, so that you aren’t surprised when it takes time and work to achieve success.

First, price matters… a lot! You wouldn’t see over 500 price reductions if those sellers weren’t convinced by the buying public that they needed to be more competitive with price. Even the red-hot under $350,000 price point has far more condos for sale than 6 months ago. In an analysis for a seller in Canyon Country, there were over 70 condos of 2 bedrooms or more that she potentially competed against. Buyers looking at those condos have plenty of selection and they are going to want the best value for money. Price is where value for money starts. This has led to a trend we haven’t seen for a while – offers coming in below asking! In some cases, especially if the home has been available for a while, well below asking. Also, buyers are again asking for sellers to help them with closing cost credits to help them purchase. It doesn’t mean the sellers will take it, or that they should. But being mentally prepared for it really helps. Before listing your home make sure that you know all of the homes your likely buyer will be comparing your home to. Ideally try to find out if those competing listings are likely to reduce their price anytime soon. If they have been on the market awhile, try to determine what the issue is. Usually price is a factor.

Next and somewhat related to value for money, is that buyers are not simply buying the lowest priced home in an area and fixing it up. This is partly due to the type of buyer we have today versus two years ago. Specifically, the “investor” and “buy & flip” buyers are gone. Today’s buyer is going to live in the home. Therefore, they will often select the more upgraded home and PAY MORE FOR IT than the “fixer-upper.” This often confuses potential sellers who think that because they are the lowest priced home they will sell first – sometimes yes, sometimes no. Here is a good example. I had 2 fairly similar 2,800 square foot homes for sale in Stevenson Ranch listed $70,000 apart. The more expensive home with totally remodeled kitchen & baths, molding throughout, shutters and wood/stone floors sold in less than 30 days with 3 offers. The more modest home with base tile, original carpet, fresh paint and original kitchen took 90 days to get an accepted offer and had to reduce $25,000 in the process. That amounted to a difference of almost $100,000 and 70 extra days to sell. Why? Because buyers look at today’s low interest rates and ask themselves if they would rather take the time & cash out-of-pocket to do the work, or pay more per month (tax deductible) and just move in to a “turnkey” home? Today’s buyer is choosing the already improved home, unlike the buyer in the past. They do this because they have the confidence to pay today’s higher prices IF the home is in superior condition. The market has stabilized and they are comfortable doing this.

Last, and this is huge, the “best” buyer in today’s market for many sellers is actually a contingent buyer! Not contingent on selling, but rather on closing. This buyer already has their home in escrow and now MUST buy. They are highly motivated and will complete the transaction. In the beginning of this blog, when I referenced the much higher fall-out rate for escrows, I can assure you that the majority of these were due to buyers either getting cold feet or having an issue with inspections. The non-contingent buyer often doesn’t have the same sense of urgency to complete sales because in many cases, they think another home will come up for them if the one they are in escrow with doesn’t work out. This almost never happened before, but it is happening now. The buyers cancelling escrows are mostly buyers that don’t HAVE to buy. Meaning, they are renting or staying with family, don’t need to sell anything before buying. They have no required timeframe to get into a home. This is why I advise every seller evaluating an offer that the MOST important thing for me to evaluate is the buyer’s motivation. How serious and committed to your home are they? Why are they buying it? The buyer already in escrow that HAS to buy almost always completes the transaction. They aren’t “tire kickers,” they are REAL buyers. Even though there is another transaction (or 2 or 3!) that needs to close for us to have success, they do close when properly vetted out. Sellers may think this isn’t an ideal buyer, but in today’s market they are and will likely be the key to driving transactions for the next few years. There is simply not enough of non-contingent buyers out there today to pick and choose.

Here are a few final thoughts for potential sellers. Homes are taking longer to sell so give yourself more time than you might think you need. Next, make sure you know what your competition is and how you compare before you list your home. If there are a lot of competing homes for sale in your area, if may make sense to wait if you can. Last, the most frustrating part of a changing market is that there may only be 1 buyer for your home at a given point in time. I have seen dozens of homes get an offer quickly at a good price only to have the deal fall apart and then take months before there is a new buyer…sometimes at a lower price. Again, an agent that is experienced and knows the right questions to ask can help avoid these potential problems that a changing market can bring. Knowing not just what to expect, but how to avoid the potential problems, is the key to selling in today’s market.