IS THE MARKET GOING DOWN OR NOT?

Dated: 12/20/2019

Views: 101

As we look forward to a New Year, in fact a new decade, I thought I would try to address the question I’m being asked the most. Are prices actually going down in Santa Clarita? We certainly have seen the red-hot Sellers’ market transition starting about 18 months ago to a more balanced market for Buyers and Sellers. That doesn’t necessarily mean though that after some minor adjustments last year that prices fell in 2019. In fact, the overall median are about the same. However, there are clearly changes impacting values and we will address them here. A client called and said she was planning to sell but wanted to time the selling process to get the most money. We hear that a lot! She knows that spring is a good time because so many people move around the school year in Santa Clarita. That’s true. She didn’t want to overprice the property because in her neighborhood many homes in 2019 didn’t sell until they reduced the price and often after many months. Then, I sold a home quickly and for more money than any of others and she was confused. Could she ask the same price? Would it sell quickly? Were prices really lower than in 2018 like her online valuation and her neighbors said? Would it just make more sense to take an “instant offer” and avoid the whole marketing process? She was afraid that her market value was lower than before and she may have missed the best time to sell in 2018. Then my sale confused her further. Maybe the market was still just as strong? Could she get that price even though her home wasn’t redone like my sale? The answer is that prices really aren’t that much lower than the height of the market which was spring 2018. In fact, we had some sales in 2019 that were as high as we have seen since 2006. The bigger question is why are some homes taking so long to sell when that never happened 18 months ago? Why are we seeing price reductions before some homes sell, sometimes multiple price reductions when that wasn’t necessary before? This is happening and can often give the impression that the market is going down when the truth is that it adjusted about a year ago a bit and has been pretty stable pricewise ever since. However, what sells quickly and for top dollar and what doesn’t is not as clear as it used to be and there are trends impacting home sales we haven’t quite seen before. With over 31,000 approved new homes coming to market starting next year, understanding these trends will be even more important. So, is the market declining for some homes? In Santa Clarita, we must read between the lines.

 The overall market is softer today than 18 months ago. There are less Buyers and less offers being written, and Buyers are more cautious than ever because prices obviously aren’t going up. Buyers don’t want to pay a price today that might be lower in a year, so they take their time. No more crazy overbidding like 18 months ago except in very rare cases.  That’s why the average time it takes to sell a home has gone way up in almost every neighborhood in the last 2 years. This is true everywhere in Southern California. The single biggest distinction between what sells and doesn’t sell quickly is condition. Never before has condition had such an impact on price and the time it takes. As recently as 5 years ago I would give pretty basic advice to a Seller to get top dollar. “Declutter,” move some furniture to open up their home, maybe paint and carpet – pretty basic stuff. Today, we have to realize that it can often take a lot more than that. One of the biggest trends of the last decade has been the effect of HGTV and home flipping on what sells and what doesn’t. I see virtually every home that comes on the market and can tell immediately what will sell quickly and what wont. Walk through a broker open house and the agents all know in 5 minutes what the Buyer reaction to a new listing will be. New light colors, updated kitchens and baths, plank style flooring? “It will sell.” Tuscan décor or darker woods – maybe not. We had total remodel homes in Stevenson Ranch that sold for prices not seen in years while others sat in 2019 simply because of this. Just walk into any model home and you can see what Buyers respond to. Making those changes or upgrades obviously isn’t possible or of interest to many Sellers but it can be reflected in the price and days on market as prospective Buyers consider what their cost to update will be. Unlike 2 years ago, they don’t just buy every home even though inventory remains relatively low.  So, we now stage probably 20% of the homes we list with a professional company to give the impression the home has been updated. That’s higher than most agents but watch this trend really take off when all the new construction hits and starts to siphon Buyers away from resale. It simply pays for itself.  If you see homes in your neighborhood that haven’t sold almost for sure it is due to condition and proper marketing. Homes don’t simply sell because the market is hot, because in many areas it isn’t that hot while in some it still can be. Condition, location and lot size have more impact than ever. This can lead to the confusion my client had as there can be huge spreads between the same model in some neighborhoods. In Southern Oaks on the same street we had a model sell for $1,500,000 and 3 doors down the same home with original décor and no pool not sell for $200,000 less.

 Only in the under $550,000 market can homes, especially detached homes instead of condos, still sell regardless of condition due to lack of competition and strong demand. Still, the highest sales in this area are always updated. The highest price per square foot in Castaic this year was an entry level home that I sold that had been remodeled and sold only months after purchase. High demand, limited supply. Top prices in 2019 typically happened in neighborhoods where not much comes available and had locations, lot sizes and upgrades that Buyers still pay a real premium for. If you have one of those it’s likely that your home is worth just as much as it ever was. This is true in all price points. This is one of the big problems with online valuations. There is simply no way for a computer to know that a home has original oak cabinets, outdated flooring and old white appliances, and isn’t worth as much as the remodeled home across the street. Again, looking between the lines and considering what your competition is before putting a home for sale has never been more important. To sum it up, 2019 was a steady year for Real Estate. Median prices are about the same and thanks to lower interest rates and higher incomes, Buyers could afford homes at an even higher level than 2018 balancing out the lower demand. Without lower rates & higher incomes factors, prices may not have been as stable. Moving into the new decade, though, be aware that we are about to experience something never seen before in our valley and it will impact pricing and days on the market, perhaps dramatically.

 It wouldn’t be appropriate to write my last update of the decade without commenting on something I have never seen in selling Real Estate for 29 years. Never in the history of Los Angeles County have so many new homes been approved to come to market as in Santa Clarita starting in 2020. In a business driven by supply and demand, this level of supply is unprecedented. I have been calling my clients to make sure they know and understand this. It isn’t just that these new homes compete directly against many of you that plan to sell in the new decade. In some cases they do, in many they don’t. However, some of your neighbors will put their home on the market to buy new. This means competing homes in your neighborhood that wouldn’t be there without new construction. Further, these new homes have everything the biggest Buyer group (yes, the millennials) want. Smart homes, solar included, the newest upgrades and desired features. For most of us we do NOT want to compete against that. The low supply of homes for sale that has kept resale prices up will be impacted by this.  This is unique to Santa Clarita and bears watching closely. My strong advice to Sellers is to sell when the competition is lowest. Have a plan to make the home show it’s best. Give yourself probably more time than you might think. In this way you will maximize the desired result. For detailed information on the new construction coming or any questions related to our market I, as always, welcome your call!

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Neal Weichel

I have been fortunate to help over 4000 families buy and sell Real estate since 1991. Real Estate has changed a lot in that time with utilizing the best of modern technology being critical today. To b....

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