Review - Summer 2006
Review - Summer 2006
Dear friends & past clients,
Each year I report to you what is happening in Real Estate at the mid point of the year and for the first time since 1999 there is a change in the expected future of our prices. From 2000-2005 we saw annual appreciation in Santa Clarita of 10-25%. Homes that I sold in 2000 many times had more than doubled in value by 2005. Talk about happy clients! Usually the big run up in value would occur between February and May and prices then would stabilize for the balance of the year, and the cycle would resume the following February. Starting in 2003 I expected prices to level off, but for a variety of reasons (lower interest rates, creative new loan options, lack of inventory, speculation, buyer confidence, etc) values rose approximately 20% in 2003 and 2004 and rose 15% in 2005. In May of 2005 the market stopped appreciating and in fact in the past 15 months has given back from 4-10% of its value from the May 2005 peak. The cause of the decline is a sharp rise in inventory; one year ago there were 800 homes for sale, today there are over 2400. I would not be surprised to see an adjustment of perhaps another 10% in the next year, as rising interest rates, rising supply, and a lack of buyer confidence keep price competition among sellers key. For more insight please check my blog at Nealweichel.com.
What is interesting about trying to predict the next few years is how many people are now predicting more doom and gloom. Realistically, long term growth for Santa Clarita is strong, and short term adjustments like this are normal. It is important to note that more affordable markets (Oregon, Utah, New Mexico, etc) are still very strong—their supply/demand situation is much like California has been. However, more speculative markets like Phoenix and Las Vegas are getting walloped. Last year for example there were 7000 homes for sale in Phoenix, today there are over 45,000! I believe Santa Clarita is in the middle—there certainly has been a lot of speculation in newer areas that today are very slow (Westridge, Tesoro, etc), yet 2400 homes for sale still is not too many for a valley our size. After some adjustments, I believe buyer confidence will return. The wild card in how much price adjustment we are in for and how long it will take is new construction. At the end of this year there will be almost 4000 new homes getting ready to be sold in Valencia’s West Creek/West Hills and River Walk developments. How they are priced and how quickly they are sold will obviously have a big impact on the resale market. For this reason I will be having an informational meeting in late September/early October at the Hyatt with the developers from Lennar. Please email me at Neal@Nealweichel.com to be placed on my guest list if you would like to come learn about these new communities.
Finally, with this changing market, I am getting calls from your friends, coworkers, and family about buying/selling. I greatly appreciate you remembering me and referring them. Please know that my past clients are very important to me and I will always give your referrals 100%. Thank you again. Enjoy the rest of summer and I hope to see you soon.
Sincerely,
Neal Weichel