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The Temperature is Rising, but will Home Prices?
June, 2007 - Issue #32
It's the question everyone keeps asking: What's going to happen with the local real estate market?

Some have raised the specter of a housing crash. But the real estate bubble (if there is such a thing) has not popped - at least not yet. Home prices in Santa Clarita, while down from their high of two years ago, have not slipped as much as many expected. That's good news for homeowners, but there is a catch.

Homes are not plummeting in value, but they aren't exactly jumping off the MLS list, either. Buyers are still holding out for cheaper prices, while owners not desperate to sell are holding out for a healthier real estate climate.

What's in store for the summer months, a typically hot period for the housing market?

"There's been no sign of an upswing yet," says Bode Seriki, owner of Mirada Capital. "On the buying side, it's tough because lenders have tightened their lending procedures. On the selling side, it's tough because there is so much inventory."

The industry, says Seriki, is feeling the effects of the sub-prime lender collapse. For years, such lenders were offering loans indiscriminately. Now, as some homeowners begin to struggle to make payments, foreclosures are on the rise. That catches the attention of lawmakers. "To avoid being regulated, the lending industry is regulating itself," says Seriki. "It's tightening up."

The result is people are having a harder time qualifying for loans, which adds to the real estate slowdown. Houses aren't moving - at least not the way they used to. "A year to sell a house is normal around the country," says Joshua "Dr." Suess of REMAX of Valencia. "We've been a little spoiled over the last five years. Waiting 90 to 120 days [to sell your house] is not bad."

The market could pick up, Suess believes. But if it does, we should know soon. "We're at a crossroads right now," Suess says. "The next 45 to 60 days will be crucial. Typically, the summer is the best time to sell."

Lissa Brassfield of Realty Executives, who has seen 29 years come and go in the SCV market, is undaunted by this latest trend. "Regardless of how prices seem, they will continue to appreciate, perhaps not at the rate we've seen. But it will," she says. "Prices will always eventually go up."

For buyers with good credit and cash on hand, a moderate slow down can mean good deals. Sellers are willing to listen to offers. "I don't see a market crash," says Kris Hough of SCV Bank. "Some loans are doing well. They're getting a lot of interest. There are tons of options. Rates are good, so it's a great time to refinance or fix your existing loan."

The problem, though, is that in a tighter loan market, refinancing isn't as easy as it used to be. You need to have built up some equity in your home, and that's something last year's interest-only loan borrowers haven't done.

Toni Lavaeddin of Exclusive Realty and Mortgage believes buyers have learned their lesson. "People are shying away from interest-only loans," she says. "They're going for the 30-year fixed loans."

One piece of good news for buyers who have become over-extended is that banks have shown a willingness to accept short sales, where they will agree to take less for the home than the amount left on the mortgage. Between a short sale and a foreclosure, banks prefer to take the cash. "I'd say about one in 10 sales in Santa Clarita are short sales," Lavaeddin says. "In the Antelope Valley, it's closer to five out of 10."

As far as how long the homes are sitting on the market, Lavaeddin estimates the time to be between 120 and 180 days. "The homes are selling, just not as quickly as before," she says.

Another bit of good news is that interest rates have not gone up. Homeowners with adjustable-rate loans have not been hit as hard as many feared. "Am I surprised [interest rates are down]? Absolutely," Hough says. "You can still get a good rate. You can escape those risky loans."

A slow market also means buyers have the option to be picky. They can afford to wait for a better deal. They can also afford to make sure the home is exactly what they want. That's where real estate inspectors enter the scene.

"Buyers want homes inspected so they know what they're buying," says Annette Mathews of Castle Real Estate Inspection. "People do this because it adds to the disclosure of the property."

Choosy buyers are relying on inspectors to find the hidden flaws that could add costs to owning the home. Is there a crack in the foundation? Does the plumbing need replacing? Is the roof leaking? What about termites? Answers to questions like these can give buyers (and sellers) leverage. They also provide peace of mind.

The job of selling the property, of course, belongs to the real estate agent. In a less-than-hot market, buyers and sellers rely on agents to help them make informed decisions.

"It's very important to have an experienced real estate agent," says REMAX agent Pam Ingram, a member of the SCV Networking Group. "You need someone who understands the market and knows the comparables."

Today's market requires a more deft touch. "There are some homes priced below market and you need to know where the good deals are," Ingram says. "Buyers have a lot of negotiating room, so you also need a negotiator. You need to know if the price is below market because it needs a lot of work, or if it's really a good deal."

In today's market, a bit of expertise can go a long way. It can make all the difference.

Either way, says Brassfield, a home is a home, after all. "The bottom line is don't be discouraged," she says. "A home is always a good investment. It's where your life happens. Find something to love and love to live in it."

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Professional Contacts

Kris Hough of SCV Bank
661-255-9250

Annette Mathews of Castle Real Estate Inspection
661-433-6600

Bode Seriki of Mirada Capital
661-295-6706
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