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!

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