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 Further, the large amount of homes available 15 years ago has been replaced by a complete shortage.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!