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Real Estate Update
Strategy is Key when Buying and Selling in Santa Clarita
March, 2007 - Issue #29
For years, the real estate market in the Santa Clarita Valley has been a sprint - sellers rushing to cash in on escalating prices and buyers racing to add their name to the next development's waiting list.

But things have changed.

Gone are the heydays of multiple bids on newly listed homes, along with the low interest rates that ushered them in. Gone are the days of near-instant equity and cash-in-the-hand refinancing.

What was once a 100-meter dash now resembles a marathon. To win in this market, players on all sides must make adjustments. Strategy is the key.

But not just any strategy. You need the right strategy - one that fits your circumstance, whether you're buying, selling, investing or renting.

What follows is what the local experts - realtors, builders and brokers - suggest.

Buyers

If you talk to most realtors today, the term "buyer's market" is bound to come up. Home sales are sluggish compared to recent years, and prices in general have come down throughout California.

But is that true for the SCV? Not according to some.

"Which side blinks first may come down to whose version of the FINANCIAL FORECAST prevails."
"I don't see the so-called decline in prices," says broker Bode Seriki, president of Mirada Capital Lenders. "Prices are dropping in places like San Diego. But I think it's more of a stabilization that's happening here in Valencia."

The key for buyers, say the experts, is to avoid over-thinking the market. SCV home sales have slowed because buyers are waiting to see how low prices will go. They're walking away from homes they would have waited in line to buy a year ago because they're afraid to purchase a house for $600,000 today that sells for $550,000 tomorrow.

But unless those buyers are planning to become sellers in the near future, that number is irrelevant.

"People have to realize that your home is your home," says realtor Jim Bizzelle of Pardee Homes. "It's where you live."

Buyers are also discovering that sellers don't seem (for the most part) to be as desperate as the statewide market might suggest. They'll only negotiate so far.

"Sellers are a little flexible on price," says Joshua Suess, an agent for Remax. "They'll move one to four percent. But they're not moving the five to 10 percent that buyers are asking."

According to Albany Irvin, a builder for Williams Homes, "The market feels like it may have bottomed as there has been more buying activity in the last month. However, buyers are still expecting to negotiate lower pricing, which is keeping optimism low that 2007 will be an up year for the local market."

And so we are left with a standoff. Sellers cling to their asking price while buyers sit on their offers.

Which side blinks first may come down to whose version of the financial forecast prevails.

A drop in interest rates could ignite a new run on prices. So could inflation, reduced housing inventory and consumer confidence.

Inventory, for one, is already dropping.

"Inventory has gone down since last month," says realtor Sheila Natera of Realty Executives. "People keep thinking there's going to be a market crash. But this will always be a moving market."

Again, don't over-think.

If you're looking for a home to live in for several years, this is a good time to buy because you have more choices and fewer competitors. It's Economics 101 - supply and demand.

"The next three years in the Santa Clarita Valley will be years of opportunity for people educated and patient enough to take advantage of the market," Suess says.

Sellers

If you're selling in the new SCV housing market, you must possess three traits: patience, flexibility and a willingness to be creative.

Patience, because you won't sell your home in a matter of days. Flexibility, because you may have to make concessions. Creativity, because you'll need to make your house more attractive than the competition.

"To WIN in this market, players on all sides must MAKE ADJUSTMENTS."
"We've been spoiled over the last five years," Suess says. "It's O.K. if your home is on the market for 60, 90, 120 days. You have to be patient. You have to position your house as a better value."

The problem is that when buyers see a listing that's been on the market longer than a month, they smell blood. Negotiations become more difficult.

"The key is to price it right," Bizzelle says. "Some sellers have expectations that it's the same as 2006, but they need to be realistic."

Price may be the best way to compete in the market, but it's not the only way. In some cases, the difference between "sold" and "price reduction" is presentation.

You can give your house an edge in the arena of eye appeal.

"If you're trying to sell, paint," Seriki says. "And keep your paint as generic as possible. If you have custom paint in your house, paint it white. Your lived-in look doesn't look good to everyone."

Another option is to have your home professionally staged. Let designers make it look like a model.

"Two years ago you didn't have to stage. Now buyers are more picky," Suess says.

Sellers may be tempted to make high profile improvements such as adding a pool or remodeling a kitchen or bathroom. Beware. Some improvements help. Others are poison.

"The biggest mistake we all make is over-improvement," Seriki says. "A $75,000 pool doesn't translate to a $75,000 improvement. You can get maybe $10,000 in appraisal for it."

Options like granite counters and custom tile aren't always a bad idea. But don't go overboard. "I do believe remodeling your kitchen can add value," Bizzelle says. "But it depends on presentation, and on the condition of your house."

Sellers may have less competition from new homes in the long run. West Hills and West Creek developments are moving forward, but the new home market may be slowing down.

"While growth will continue in the valley, affordability is near historic lows, so we have to look at existing and future projects more carefully," Irvin says. "Additionally, we cannot count on price increases anymore, and with building costs on the rise, some projects that may have been viable a year ago will now have to be delayed or abandoned."

Finally, if your home has been on the market for months, you have reason to hope. The rule in real estate goes, "the warmer the weather, the hotter the market." That's true in the SCV, too.

"Late April through September are hot," Seriki says. "Early spring is when things start to pick up."

Investors

Most local real estate experts agree this is not a good market for investors. Investors share their opinion.

"RENT may actually GO UP as home prices dip. It may seem counterintuitive, but only at first glance."
"A lot of investors have pulled out of the area," says Vito Scattaglia of Pinnacle Estate Properties. "They just don't see the opportunities to flip their properties."

With prices leveling off and inventory relatively high, speculators aren't seeing the quick sales and easy profits they've enjoyed for the past 10 years.

There is, however, on sliver of opportunity: Foreclosures.

"Banks are doing more REOs, which means people are behind on their payments," says Pam Ingram of Remax. "This is somewhat of a foreclosure market, though not what some people anticipated. It's a soft fall."

Banks don't want the houses back, so they are willing to sell them at a discount.

Renters

Rent may actually go up as home prices dip. It seems counterintuitive, but only at first glance.

Increases since 1997 have priced many first-time buyers out of the market. Low interest rates helped for a while, but as those have climbed, many SCV renters are finding it impossible to buy.

Added to that, some residents actually sold last year and have chosen to rent until pries reach their perceived bottom.

The result is more renters, which means greater competition for available rentals; prices go up.

"But there are about 700 loan programs available and many to help first-time buyers," Natera says. "People are finding they can get into homes they never thought they could."

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Professional Contact Guide

New Home Builders

Pardee Homes'
Woodglen - 661-250-3206
Mayfair - 661-250-8770
Hearthstone - 661-424-9001
Fairmont - 661-299-1429

Williams Homes'
Bella Vida - 661-222-7339
Stratara - 661-295-7768

Real Estate Professionals

Pam Ingram - 661-291-1PAM

Helen LaPrairie - 661-253-2112

Sheila Natera - 661-250-8693

Vito Scattaglia - 661-317-8486

Joshua "Dr." Suess & Annie Mai Thai - 661-702-4640

Insurance

Fortman Insurance Brokers - 661-775-7774

Mortgage & Lending

Mirada Capital - 877-3-Mirada

TriStar Home Loans - 661-222-9555

Inspectors

Castle Real Estate Inspection Services - 661-433-6600
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