Everywhere you look, the news only seems to get worse. CitiBank, Merrill Lynch and other Wall Street firms are being bailed out by foreign investors amid continuing fallout from the sub-prime mortgage crisis. Foreclosures are up all around the country, inflation is at a 17 year high, the Fed continues to ponder interest rate reductions and the word “recession” is getting tossed around in the presidential campaign. But the Santa Clarita real estate market appears to be weathering the storm quite well, going by several realtors and The Signal. Is it though?
On Sunday, The Signal editorialized that the “hysteria” had overtaken the debate and that the credit crunch and foreclosure crisis weren’t impacting Santa Clarita as much as other communities. The Editorialist wrote:
So are we to believe that the real estate sky is falling on the SCV? Of course not. People are still buying and selling property; those sales simply are not happening as quickly as they used to. In addition, because it is taking longer to sell and fewer buyers are in the market, prices have dropped to a level that seems much more realistic than when the market was red hot.
…
Talk to any Realtor in town and you will hear the war stories. But homes are still selling, if more slowly, so we do not think it is really as bad as it has sounded, especially in the Santa Clarita Valley.
Local real estate bloggers echo the editorial. In response, one wrote:
According to me, they [The Signal] aren’t saying anything I really didn’t know, but to put their own credibility on the line, when they certainly don’t have to, was a breath of fresh air. In my humble opinion, and based on what I see, 2008 is the year to buy a home in Santa Clarita, if you haven’t already. Prices will come down more this year, but trust me, buyers are coming out of the wood works right now and they don’t want to hibernate for too much longer.
…
Things are picking up. I can’t tell you how many offers I’ve written in just the last 2 weeks, and how many people have been emailing me, letting me know that they want to get approved for a loan, and start their house hunting project. A lot of the people calling and emailing me, are first time buyers too!
Finally, realtor/blogger Linda Slocum opined on the market in her otherwise factual accounting of 4th Quarter Santa Clarita market statistics. She said:
We all know that the Santa Clarita real estate market isn’t as active as it was in recent years, but homes are still moving even though they may not be selling as quickly or for the higher prices that we got used to seeing…it’s definitely still a buyer’s market out there.
Three different, well-informed sources say that though the SCV real estate market faces challenges, we’re not as bad off as we could be and buyers are realizing the advantage of this market. We’re told that homes are still selling and that the situation is great for buyers. We’re told to “calm down” and relax.
But are we getting the full picture? Real estate statistics, like any other statistics, are ripe for misinterpretation and even abuse. Only realtors have access to their computerized MLS system, so the public is left to read their interpretation of the statistics. I’m not saying that the three sources above are misinterpreting the statistics they source; rather I think there’s other factors we should consider if we want a complete picture of the market.
Take for instance the fact that Newhall Land, the region’s number one developer, has ceased construction of houses along the Santa Clara River in Canyon Country. Obviously the supply of housing on the SCV market is high, so demand for new homes currently is low. Newhall Land is a business and recognizes that it’s not profitable to build new homes in Santa Clarita right now. Who knows the SCV real estate market better than Newhall Land?
What’s more, anecdotal reports (equal in validity to realtor reports of phones ringing off the hook) say that there are unfinished houses all over Santa Clarita, especially in Canyon Country.
So if new homes aren’t selling and being built, what about the market for existing homes? Slocum reports that over 1,300 homes went on the market in the fourth quarter, with a big percentage of those homes either in escrow or sold during the period.
Left unanswered by all the sources above, however, is the reason why there’s a glut of homes on the market. For that, let’s look at Trulia.com, a popular “open” real estate search engine site that just recently incorporated foreclosures into its sales lists.
On Wednesday, January 16, I performed a search of all homes available for sale in the 91321, 91381, 91355, 91351 and other areas of Santa Clarita. I then filtered out “regular sales” from “foreclosures” and piped the results out to Excel. If Trulia’s figures are accurate, the foreclosure crisis has hit the SCV hard and homeowners here are having trouble making ends meet:
As you can see, almost 1 out of every 2 homes for sale in the SCV are due to foreclosures if Trulia’s numbers are to be believed. Canyon Country, Newhall, and Stevenson Ranch are surprisingly high, with Valencia and Castaic foreclosures a touch lower.
I’ll grant that these numbers are shockingly high and defy belief, and I’ll further admit that I’m not an expert in statistics or the minuatia of real estate stats. But Trulia has a fairly good reputation as an “outsider’s” source to real estate information and the chart above seems to explain the facts we do have from reputable sources.
There’s one other thing to consider too. Neither the Signal nor the two realtors quoted above mentioned these or their own foreclosure statistics in their editorials and blog posts about the SCV real estate market. They mentioned sales data that supported the view that Santa Clarita’s market isn’t in that bad of shape. They answered the “what” and “how many” but didn’t tell us the “why” though they presumably have access to foreclosure stats.
Trulia’s numbers answer that to some extent. A large percentage of SCV homeowners are having trouble making their mortgage and that explains why there are so many homes available. What we didn’t know before was the extent to which homeowners are being foreclosed upon.
At the least, this paints a more ominous picture of the market here than industry insiders and The Signal (recepient of real estate ad buys) might care to admit. It says that many homeowners in the SCV are affected by maturing ARMs and have overextended themselves. It says that credit crunch part of the equation is affecting the SCV just like it’s affecting homeowners elsewhere. It says that there are scores of families and homeowners here in the SCV who can’t make ends meet who’s stories aren’t being told.
It doesn’t tell us how long this will last, but experts think the foreclosure problem is still only in its initial stages.
So the real story of the SCV real estate market isn’t that it’s a “buyer’s market” out there or that 2008 might be a great time for buyer’s; rather the real story is that the foreclosure rate in the SCV might be just as high as it is elsewhere and is impacting scores of Santa Clarita families.
I’m not advising panic, but the Signal’s official position of “calm down” is a bit patronizing in light of these statistics and the nationwide problems giants like CitiBank are facing. We’re connected to the rest of the nation and the world, and Trulia’s numbers prove just how much.
What do you think?