Why the real estate market is hot again
June, 2012 - Issue #92
To fully understand what is happening in the Santa Clarita real estate market, it is important to look at supply and demand. If we look back at this time in 2005, the number of homes for sale in all of the Santa Clarita Valley was at approximately 500 homes total. This wasn't anywhere close to an amount needed to supply the nearly 200,000 people living in our valley. Money was cheap and buyers were confident in their decisions to buy homes and felt they would see decent appreciation in return. Prices were rising and only approximately 25% of the LA County population could afford a median priced home of $564,600. In 2006, the "bubble" began to burst with many changes occurring in the market. Prices began to fall due to inventory
tripling and buyer confidence dwindled quickly. We no longer saw buyers who "wanted" to move, it was only those who "had" to move. Even though the number of closed sales dropped for the first time in six years, the median home price in Santa Clarita was at a record high of $603,492. By August of 2007, there were more than 2,600 homes for sale in Santa Clarita. Appraisal guidelines were very strict, foreclosures were hitting most neighborhoods and homes were taking quite a while to sell. It also was the year of the lowest number of closed sales we've seen over the past decade.

For the next four years, we experienced more of the same. Fast forward to today and you'll see what is so different. At the time I am writing this, we are back down to only 640 homes for sale in our valley, which is only 3.2 months of supply, and the median sales price is hovering around $320,000. We have not seen prices this low in ten years since 2002. With incredibly low interest rates and low prices, it's more than enough to compel first time home buyers and investors to be confident enough to make purchases in nearly all areas of our valley as you will rarely, if ever, experience the best of both worlds (so to speak) like we are seeing today. In fact, due to these two factors, affordability has increased dramatically. Sellers who are offering desirable locations and /or quality upgrades are back to the good old days of receiving multiple offers within the first few days of going on the market.
Although we are not seeing the rapid and unhealthy run-up in prices that we saw back in 1998-2006, buyers are now paying asking price or more, waiving appraisal contingencies upfront, and are willing to bring in extra cash for exceptional properties.

So what can we expect for the rest of this year? If interest rates remain low and inventory levels continue to decline or remain close to where they are, we can expect to see a very hot sellers market continuing as we've seen so far in 2012. On the flip side, if the banks start to release some of the infamous "shadow inventory" that we've all heard so much about, or if interest rates head upwards, things can change rapidly as history has already shown us. Understanding the market trends and changes occurring in different neighborhoods is now more important than ever. As always, feel free to contact us for expert real estate knowledge and advice.

Contact the Suess Real Estate Experts today for a free copy of the Santa Clarita Market Trends Report. 661.251.8900 or
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