A Tale of Two Markets-June 2008

   It is fascinating to talk to buyers and sellers these days. Unlike 18 months ago, sellers now universally acknowledge “it’s a bad time to sell”. Virtually every prospective seller  I speak to me seems to want to share this, sometimes followed by “we should have sold 2 years ago”. Ok, fair enough, though technically our market has been declining since May 2005, now over THREE years ago. The point is most sellers realize homes take much longer to sell, prices are down etc .

  Buyers almost universally have their own mantra-“I want a great deal, I am in no hurry, I think the market is still going down” and so on.  Again, fair enough, for the most part it’s hard to argue with that. What a lot of buyers and sellers don’t realize though is some of the behind the scene numbers and what they may mean.  As I have said before, there is no doubt that because of lots of foreclosures and modest demand there are many, mostly newer areas built in 2004-2006, that still have a way to go price drop-wise.  Canyon Gate by Golden Valley, Plum Canyon, Creekside Valencia-I’ve mentioned them before. Then there are areas that don’t have as many foreclosures but for some reason just don’t seem to have much interest, especially over $700,000.  Historically popular Newhall is one example.  When I think Newhall, I think of a lot of things buyers request. Close to the freeway, good schools, big lots (especially in Happy Valley), big homes (especially in Hidden Valley, Peachland Estates, Customs etc), close to shopping/Town Center etc. Yet, nothing is moving in Newhall. There are over 40 homes for sale over 2500 square feet, 2 in escrow (1 in the last 60 days), and NOTHING in escrow over 800,000. How do you price a  home there with nothing selling? Trust me it’s not easy.

   So these types of areas represent the areas that are slow moving and arguably still decling in price. Yet, I’ve titled this “A Tale of Two markets” so I am about to explain something that is happening that buyers need to be aware of as they contemplate purchasing. First, because Real Estate is always numbers driven it’s important to note that we have just over 1800 homes for sale in our Valley-compared to 2400 a year ago.  For many buyers that I search for there is little for sale in their desired criteria, and what is for sale is often poor-poor condition, location-whatever.  Therefore the market is changing-supply of inventory is going down. What isn’t going down though is the percentage of foreclosures and short sales (again often in poor condition) that are out there-they comprise about 40% of the inventory now for sale and almost 80% of what is actually selling. The point is that the Jones’ with the nice home in Valencia or the Smiths with the pool home in Saugus aren’t putting their home up for sale, but WAMU and Countrywide are.  When that flow from the banks slows this market will change price wise. And if the Jones’ or Smith’s do put their home up it might very well sell quickly due to lack of real competition. Further, because the foreclosures coming on the market are almost always the lowest priced inventory in their neighborhood, they are selling IMMEDIATELY and with MULTIPLE OFFERS. This is especially true for property priced under $600,000 but it happened last month in Westridge with properties all priced over $800,000 too. I have written offers for clients on foreclosures in which there were 7, 9, 12 and 15 offers on the home in the last month. In all 4 cases the home sold for above the asking price-in one case $40,000 above the asking price. So the bottom line is, if it’s a foreclosure it sells like it’s 2004 unless it’s in an area that is undesirable-and sometimes even then! Thats tough for the sellers I represent as we try to compete against them, but understanding it is happening-and why it is happening-tells us what we can expect for the second half of the year-more of the same.

Comments

  1. Carrie says

    What is interesting to me is that the banks are pricing foreclosures in trashed condition the same as regular comps for a neighborhood. In Castaic there is a house with mold on the walls, destroyed flooring, thrashed kitchen, overgrown backyard in need of fencing and it’s priced at $329k! The same home in move-in condition with a beautifully landscaped yard is $325k – I don’t get it. Do the banks get a tax writeoff for holding on to these properties instead of selling them?

Trackbacks

  1. […] Pondering the SCV Real Estate Market: Local realtor Neal Weichel says things are a bit odd. Inventory is down this year, which is generally a good thing, but 40% of Santa Clarita’s available homes are foreclosures and short sales. Speaking of those, foreclosures are the hottest selling property type in the SCV right now, while in Newhall, you practically have to sacrifice something to the gods of realty if your home is priced over $800k. Interesting post […]

Leave a Reply

Your email address will not be published. Required fields are marked *