The SCV Real Estate Market: A Season of Change
March, 2006 - Issue #17
Local realtors agree on the current real estate climate: the winds of change are ushering in a new season. Those who wish to successfully navigate these uncertain air flow patterns ought to buckle their seat belts and prepare for landing. The destination: back to planet Earth.

"I haven't seen what we saw last year, with people offering over the asking price," says Marty Kovacs, real estate agent and office manager at Kellar-Davis Realtors. "The market is going back to what I'd term a more 'historical' trend."

No longer are home buyers clamoring to outbid each other hours after a property goes on the market.

"There's no bursting that's going to occur."
- Marty Kovacs, Kellar-Davis Realtors
"The average time on the market is three to four months now," says Realtor Garo Papazian of Realty Executives. "We in the general public have gotten spoiled. We're finally seeing a stabilization."

A balloon theory is how Kovacs explains the nature of the market's recent moves. That contrasts the common belief that rising prices occur within a bubble.

"A balloon inflates, deflates and adjusts," he said. "There's no bursting that's going to occur."

Instead, Kovacs anticipates a soft landing of market prices.

Despite the downward trend, realtors advise homeowners who are planning to sell to get their homes on the market.

"As inventory builds, it tends to move toward a buyer's market," says Realtor Pam Ingram of Remax. "I'd advise a seller to get the house on the market quickly."

With a growing number of homes going on the market and with fewer buyers to compete for them, home selling will take a little bit more work.

"A seller needs to pay more attention to the condition of the house," says Kovacs. "I'd advise my sellers to put their house in tip top shape. Making that house as inviting and warm as possible is the guaranteed method of selling a house."

That is another departure from the real estate market 12 months ago.

"Last year it didn't matter what condition the property was in," says Ingram. "Everything sold. You didn't get a chance to evaluate the quality of the house."

Some selling tips seem to hold true despite changes in the market.

"So many people put money into houses that they're not going to get back," Ingram points out. "Kitchens and bathrooms will always get you money, because that's what women look at."

Buyers have an increasingly stronger position.

"This is a very opportune time to buy," says Douglas Sedam, vice president of The Paseo Financial Group. "Because there are not many buyers out there, sellers are willing to come down in price."

Some realtors caution against waiting for certain cycles to occur before making a purchase.

"Even with the more moderate levels of appreciation expected, procrastinating again on that home purchase could cost you a bundle."
- Barry Krasner, Santa Clarita Funding Corporation
"Timing the market is very difficult," says Ken Lee, a broker with Realty Executives. "It's very different from the stock market. My advice to a buyer with a long-term outlook is, 'Go for it.' With a short-term outlook, like a year, you should be a little more cautious."

Broker Barry Krasner of Santa Clarita Funding Corporation encourages renters to get into the home buying market.

"Even with the more moderate levels of appreciation expected, procrastinating again on that home purchase could cost you a bundle," he says.

The market for brand new homes is being watched for fluctuations as well. Sales for Pardee Homes, which are being built along the 14 Freeway, have experienced few changes in course.

"The demand continues to be strong, and prices are going up," says Pat Palazzo, director of sales for the Los Angeles-Ventura region.

Due to higher prices and rising interest rates, Pardee has seen some buyers deciding to buy their smaller products, says Palazzo, but new clients still want as much square footage as they can afford. Some favorite options are numerous bedrooms and granite countertops.

"Our homebuyers want that all important 'wow factor,'" says Tom DiPrima, president of KB Home's Los Angeles-Ventura division. "Homebuyers are savvier than ever. They know the difference between tumbled stone and travertine, and they want commercial grade appliances and cedar-lined closets even if they're starting out in their first home."

KB Home has seen a growing demand for contemporary design, including bamboo flooring, cement inspired countertops and sleek finishes for cabinetry.

Interest rate hikes could play a major role in someone's decision to buy.

"Buyers are buying like we used to buy cars, getting the most house for your payment," said Ingram.

And by most estimates, interest rates will continue to rise - moderately.

Lenders are getting more creative in their efforts to finance home buying. There are interest-first loans, and many buyers get 100 percent financing. There are steps new buyers can take to become financially ready for a purchase.

Dana Knickelbein, branch sales manager at Lockheed Federal Credit Union, has some tips for becoming financially ready for a purchase.

"Be careful that you don't overextend yourself," he advises. "Take care of your credit. Pay down your unsecured debt, like credit cards. Save, save, save. Have reserves."

These Santa Clarita experts agree that this valley will continue to hold its property values.

"When it comes to new home buying, clients still want as much square footage as they can afford."
"It's a very family-oriented community," says Ingram. "It has very good schools." Ingram considers Santa Clarita's safety to be its best asset.

"Even if interest rates move a bit higher, it won't be enough to cause a nationwide slide in home prices," says Krasner. "The key to a healthy housing market is the job market. If the payment on a new home might be slightly higher due to increased interest rates, it generally won't stop someone from purchasing the home of their dreams, but if they feel their job is in jeopardy, it might be enough to stop them from making a move."

As long as the demand stays strong, so will the housing market.

"We're very fortunate here in Southern California, because we have the entertainment industry and the internet companies," says Papazian "As long as the economy is strong, I think we should do fine."

According to Kovacs' sources, economic forecasters are predicting about four to six percent appreciation of property values this year.

"That is more of a historic figure, as opposed to 15 to 20 and 30 percent," says Kovacs. "The news is incredibly good. If what we see is just one or two small raises in interest rates, then I'd expect to see a healthy market this year."
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