
Coming into the tail end of 2008 and for all of 2009 anyone who has been active in the market has noticed a definite shift in supply and demand. Housing choices and availability have been minuscule while Buyer demand has been increasing at a shocking rate, this has caused a shift from a “Buyer’s Market” into more of a “Seller’s Market”. Despite what the media portrays, Santa Clarita and many parts of the nation are definitely seeing a positive change in the market place.
There is no question that today is an excellent time to purchase a home. First-Time Buyer’s know this, investors know this and so does everyone else in between. Sure there are First-Time Home Buyers either who are, or that are anxious to take advantage of the $8,000 Federal Tax Credit which expires November 30, 2009, but also, a large amount of Buyer’s have been unable to afford a home for the last few years, and now homes have come into striking distance for them. Investors have noticed that properties have cash flow capability and/or an attractive rate of return (ROR) on investment so they to are adding to the already active buyers in the market. Nevertheless, historically low interest rates along with the significant price declines have made purchasing more attractive to renters, as often times the benefits and cost of home ownership out weigh renting
Looking at the inventory as of October 20, 2010 detailed below, it’s evident that it remains extremely low.
- Homes Actively for Sale: 595 – Out of the active listings: 382 are not short sales
- Homes Accepting Back Up Offers: 541 – Out of the Homes Accepting Back Up Offers: 134 are not short sales
- Homes Pending Sale/In Escrow: 532 – Out of the Homes Pending Sale/In Escrow: 274 are not short sales
- Closed Sales Year-to-date: 2,666 – Out of the Year-to-date (YTD) Close Sale Transactions: 2022 are not short sales
Looking at the numbers shown above, it’s important to note that if all the homes were able to go through escrow within 30-45 days while demand remained constant, it would indicate that we have approximately 1 to 1.5 months of inventory. However, take note of the following percentage of short sale properties:
- 36% of the Active listings are Short Sales
- 75% of the home accepting Back up offers are Short Sales
- 49% of the homes Pending Sale/In Escrow are Short Sales
- 24% of the YTD Closed Sales were Short Sales
What do these numbers mean? Out of the active listings there a number of “Short Sale” homes that are not “Salable” today and therefore are unable to Close Escrow within 30-45 days which only helps to increase demand on “Salable” homes.
Take short sales out of the picture for a moment, and notice that remaining inventory available are either foreclosures, or equity sales. With so much pent up demand and the limited number of homes available to purchase NOW, it is easy to see why “Equity Sales”, Investor Owned Properties, and Bank Owned Foreclosures becoming available with effective pricing are receiving numerous offers, selling over list price, and selling extremely fast. (**Due to complications with some appraisals and implementation of Housing Valuation Code of Conduct, Buyers are sometimes asked to waive appraisal contingencies**)
You may be asking yourself, what about new construction? I did not mention new construction in my analysis because most builders in the area do not have standing inventory available which means that a prospective Buyers will be required to wait 6+ months for their home to be built. (But if you do visit new developments, you will likely be shocked to find out that most of the projected home sites are selling out). Additionally, some home builders have discontinued or threatened the though of discontinuing development until they feel a clear forecast of what lies ahead for housing market and economy is on the horizon.
With that said, if you are looking to avoid competition and potential bidding wars, short sales might be an avenue to consider. If you have the patience and discipline to pursue short sales with your Real Estate Professional, there are many available to you. You may be surprised to find that sometimes you can get a great deal simply because many Buyers find another home prior to final approval of short sale. I’m not implying that you should find the 1 (one) short sale that peaks your interest, write an offer stop your search, and wait with your fingers crossed, in fact any advice or thought to do just that is a BIG mistake that often costs you other opportunities, and will leave you with an uncertain future in your house hunting journey.
**When I work with my clients I advise them of the situation and potential pitfalls of these transactions, while explaining that short sales are a starting point and nothing more. NEVER stop your search because short sales are not 100% guaranteed. Keep looking and if the short sale happens to get approved and you have not found a home, then go back analyze price and terms, and decide which route is best for you.
In closing, it is important to note that if you are a Buyer in this market looking under $500k expect to encounter competition (even on short sales). It seems to be that writing 8+ offers on different homes today is the norm. If you’re unable to secure a home right away, do not give up! be persistent and your efforts will pay-off.
Check back soon for how I think the unsuccessful short sales and upcoming foreclosure homes might impact the local housing market.