A foreclosure market - a market that is predominately "foreclosure" in available inventory - an investor heyday. This is the rich become richer and those who are trying to keep their heads above water sometimes slip off of the dock.
A healthy market - where the current market is below 1% foreclosure or distressed in nature. This is where we are as of this posting about the Santa Clarita real estate bubble, July 16, 2019.
A Buyers market - this type of market exists where we have an overabundance of housing inventory. Lots of units to sell where they have built up beyond the ability of the current buyers to buy them. This is a place that is known as the "buyers zone". Buyers are able to get more discounts, credits, and items repaired or adjusted on the homes that they are buying. This is also the market condition where a home buyer is able to get extended timeframes and where the "removal of contingencies" may be relaxed to the buyer's benefit.
A Seller's market - this occurs when the inventory of homes in lacking and where the home buyer drive is high. This type of market is typically the result of the occurrence of a "healthy" housing market years after a foreclosure cycle. In a seller's market, the sellers are able to pick and choose the offers which are presented, in multiple amounts most times. Their savvy agents are taking advantage of this type of market for the seller's benefit in the multiple countering approaches to each home buyer that put pen to paper. Reduction of buyer investigative time frames, escrow periods that fit best with the home seller's needs and being able to be "choosy" when it comes to the types of financing presenting by those home buyers is what makes this type of market a seller's advantage.
The "in-between" market - this is the place where people become somewhat unsteady. This is also the place where the talk starts about there being some type of "housing bubble" that is going to occur in the real estate market. Other words that are used which seem to fall softer on the ears would be "market correction". Typically, this is the transitional phase between a seller's market to a home buyers market. On the way through the fray, we hit this "place" that has a real estate and housing market showing signs of being tired. Homes start to remain on the market longer and longer. Home sellers, out of desperation and for market reasons, start price reductions. In this type of real estate market, the "in-between", buyers learn fast that they should be increasing their "price search span". If they are qualified at 500k - they should increase that amount by 10%.
The 10% figure could be negotiable in a housing market that is about to experience some type of adjustment. Ultimately, the home buyer gets a response from the seller equating they should "pound sand" in reference to their low ball offer. However, buyers are not scared to make lower than listing price offers in the "in-between market".
Pull back and look at the overall economic picture
When considering whether or not a housing bubble is upon us, a good place to start is a review of housing prices. Where are we on a historical level? If we are 5% higher than the last high point in the local Santa Clarita real estate market, we have then exceeded the historical height of housing prices.
When looking at this data, it's not hard to figure out because most people move every 5 years or so. If the last collapse was in 2007 - this is 2019 - we are a couple of years on top of the 10-year history. Finding a single-family home that sold back 10 years ago has been saved by our local Board of Realtors. If you want to check on that data, just send me what type of home and where it's located and I'll give you the intel as to where we are currently and where the past historical high was.
Real estate has been the best long term investment. If you look back to when my parents bought a home - which was back in the late 1960s and early 1970s - interest rates were different and the home prices were a lot lower than today. Back then people had somewhat of the same process they have today. They considered that homes would not get more expensive than X. X - being the most expensive cycle back then. However, my parents paid less for their home back then than I currently paid for a mediocre automobile and if they were alive, I am sure they would be reflective about how home prices were sure low in their day in comparison.
So, what happens next to our local Santa Clarita real estate market, are we at the point of having our housing market pop?
To explore the housing market further, we need to take a look at the new home builders.
You may not want to buy new. You may like the established and value-driven re-sale homes that are currently for sale. That is a better fit for most. However, there is nothing quite like buying a new home, it has that "new home smell".
We represent our clients when buying new homes! Our representation is FREE for you. Call Connor for a new home tour and make sure I'm with you your very first visit, I'll take you to ask the right questions that will get you the maximum benefit! 661.400.1720 Connor.
When the last foreclosure cycle was building, the new home centers and the new home builders slowed their roll in building in stages. They first slowed and stopped building "available to move in" inventory. They transitioned to "build to own". Then they were taking orders and slowed to closing their doors completely. Most of the new home centers were not at "build-out". Build out means when all phases are completed and when the model homes are sold.
In fact, in most cases, the new home builder model homes were fantastic deals when all was said and done.
Did they know that the housing market was about to collapse? I cannot say for sure, but they did have the insight to pull away before the big subprime lender fell. The Sub Prime Lender claiming BK in March 2007 caused a domino effect. Being number 2 in Sub Prime Loans caused a massive wave of foreclosures and short sales in our Santa Clarita housing market, not to mention the rest of the USA.
Interest rates have a say about the state of the current real estate market
The lower the interest rate indicates how money is "easier" and "more plentiful" for buying homes and real estate.
However, money may be easy, but to acquire it is not. There have been a lot of "checks and balances" put into place since the last fall. You can say a lot has been learned.
Most have put those "old tricks" to the side and are only working in the 30 years fixed loan model. The Adjustable Rate Mortgages(ARM) with hard and soft pre-pays are no longer a "thing", for now. I hear some lenders speaking about the ARM loan products attempting to surface, but our clients are happy to steer clear.
When we are counseling those considering buying real estate, the discussion comes down to what you can afford versus what you qualify for.
Those numbers may be far apart. The real estate lenders are going to qualify you to your max. The maximum amount of mortgage you can handle related to the overall housing cost including your downpayment and amount financed.
You may hear the amount of the mortgage payment at your maximum qualification amount and faint.
This is where it's up to you and yours to put the brakes on. This is one occurrence where it's okay to press them all the way to the floor.
Have your lender or mortgage broker give you the payment amount at less than your maximum at 50k increments until you have a good fit.
You have the rest of your life to be mortgage poor, which I don't recommend ever, but you absolutely should not do it your first time out.
Look at your bills, the addition of your new mortgage payment, look at the tax break (consequences), this is typically positive, but check with your CPA, look at the costs of homeownership - Home Owner Association Fee's - Home warranty - services like pool - yard - general upkeep. Look to the unexpected or historical track record related to your monetary needs. After careful analysis, you should be able to arrive at your very best scenario.
Something that some don't consider is the tax implications of buying a home. Check with your CPA to verify, but mortgage interest is deductible on your taxes. That is a benefit of homeownership.
Factor in the present and not by future earnings
When considering whether to buy a home in any real estate market, even those which seem like they are going to pop, don't depend on your future earnings.
If you have a lot of your pay in the form of overtime, stay away from that being included in the factoring of your "approval amount". The home lender or mortgage brokers will use it if there is enough of history. You can ask them not to include it. If you are expecting a future promotion, don't use that "pay increase" to move you outside of your "comfort zone" even for what you will rationalize the pain will only be temporary.
We work with a lot of police officers, deputy sheriffs, and firefighters. Some have more access to overtime than others. It's not rare to find one from those professions who work a lot of overtime. So much so they are almost doubling their pay week in and week out. I will make the obvious inquiry: "What if the overtime stops?" Think about it and don't let your mortgage and home purchase depend on something that could stop.
The same applies to promotions. It could be that you are banded to promote on the very next list. Promotion freezing happens. What if they freeze the promotional list with you on it and you have just bought a home depending on that pay increase?
Of course, "future earnings" are typically not able to be used by lenders, they look backward not forward. This is for you own protection and a good thing. However, if you are looking at your qualification amount and it's uncomfortable, don't use "future earnings" to validate it with yourself, so hence my point.
Is the Santa Clarita market on a housing bubble
No, we are in the "in-between" closer to the seller's market side currently.
Real Estate inventory has started to increase from where it has been and days on market time frames within the Santa Clarita Valley cities have been increasing.
It's taking longer to sell Santa Clarita homes and homebuyers are slowing their buying activity.
People are still buying Santa Clarita homes, sellers are still selling Santa Clarita homes, they are just doing it less frequently.
The summer of 2019 is upon us, the date of this article about the Santa Clarita housing bubble is July 16, 2019. We are very close to the point where most folks who "fled to vacation" have returned and if they are considering buying or selling, they are going to want to start soon so they are synced with the upcoming school year if they have public school, dependent children.
Currently, escrow time frames in the Santa Clarita Valley are 45-60 days, depending on the loan type and lender saturation.
If someone bought a Santa Clarita home today using a 20% down convention loan today, and if the home they are buying is not contingent on the seller having to buy a home at the same time, and if the home buyer did not have another home they needed to sell to buy, they'd be able to close by August 16, 2019. - That's 30 days with a Conventional Loan.
Today, if a home buyer was going to buy a Santa Clarita home with an FHA loan using 3.5% downpayment, if the scenario above was the same, they'd be able to close August 30, 2019.
And, if a home buyer was buying a Santa Clarita Valley home using a VA - Veterans Administration loan, their closing date would be September 14, 2019. That's a Saturday, therefore the closing date would be a day earlier or Monday of the following week.
All loan terms are loan dependent and some lenders can move faster than others.
Also, the home loans depend on the backing. Such as the VA, the Veterans Administration keeps a close watch on their appraisers. They appraisers don't typically get to appraising the real estate being bought by the veteran as fast as the other lending types.
I'm Connor and I'm honored to be your Real Estate agent in the Santa Clarita Valley or be your referral agent for areas outside of where I'm comfortable representing buyers and sellers of real estate.
I have been selling real estate, representing home buyers and home sellers since 1998. I'll be here for you when you are ready.
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