LOCAL REPORT: San Fernando Valley (SCentral)

In my continuing effort to educate and inform consumers and prospective buyers here in Los Angeles & Ventura counties about our local market, I want to continue with the next series in my local reports: San Fernando Valley (SCentral).

The central San Fernando Valley is a rather large area that encompasses numerous cities so in an effort to break it down to a more manageable area, I am going to divide the central San Fernando Valley into two smaller areas: SCentral and NCentral.

The SCentral area includes those cities in the southern central portion of the valley (Encino, Lake Balboa, Reseda, Sherman Oaks, Tarzana, Valley Glen & Van Nuys). This area is located along the 101 corridor of the valley just north of the Santa Monica Mountain, which basically separates the “valley” from Los Angeles.

Using the same price range of $417k< as I did in previous local reports, when working with prospective buyers in the SCentral Valley, the homes in this price range are mostly modest three and four bedroom homes averaging approx. 1,400 sq. ft. in size, which is a little smaller than the homes over in the West Valley.

Last year, the average sales price for the price range of 417k, in the SCentral Valley was $328k; this year, the average sales price is $306k, approx. 7% drop in prices. Not exactly one of the bright spots in the valley but not exactly the double digit drops that the media has been spewing about.

In reviewing the sales for the past 90 days for this price range because this is the timeframe that lenders and their appraisers often look at when determining property values, the number of property sales in the SCentral Valley has decreased about 15% from the same time last year. Not exactly indicative of a buyer’s market and in some cases, quite the contrary.

The issue of less sales is often the result of less inventory, which is also reflected in the areas absorption rate. The absorption rate is the number of months it would take to sell the properties that are currently listed on the market. The current rate of absorption for the SCentral Valley is 4.1, which means based on the average amount of sales per month, there is approx. four months of inventory on the market.

Generally speaking, a stable market would be an inventory of about six months or an absorption rate of six. Therefore, reduced inventory indicates a seller’s market and an increase in the competition between buyers for many of the prime properties. Consequently, this scenario generates bidding wars and actually drives prices up, which is also not a sign of a buyer’s market.

For much of the past 12mon, the absorption rate remained relatively low with less than four months inventory, however, in the last 90days, the inventory has ticked up a little. This has less to do with an increase in new listings and actually more to do with less average sales per month. In the past 90days, average sales per month have dropped 10%, which is a strange trend because in the summer months, we will often see an increase in sales but not this summer.

In the SCentral Valley, the average sales price vs list price (SP% vs LP%) is approx. 96%. While the avg SP% vs LP% for financed properties (99%) is slightly higher than the SP% vs LP% for cash sales (95%), even the cash sales are not what one would call "lowball" sales. Although the lowest cash sale was 74% of list price (it was a total fixer), many of them were at list or near list and many were actually higher.

Here in the SCentral Valley, approx. 46% of all properties were at list price or higher. For buyers looking to purchase a nice looking property in the low-end of the market here, chances of you having to make a full price offer or higher are highly likely, unless of course, you have a boatload of cash.

Here in the SCentral Valley, the practice of many listing agents to intentionally list property slightly below market value simply for the purpose of generating bidding wars in order to get higher than list offers is very prominent. Based on this practice the average SP% vs LP% for those offers at list or higher is 102.56% with financed offers being the highest percentage of higher priced sales, which means buyers with a loan are generally paying more than buyers with cash.

Having said that though, cash is not necessarily king here in the SCentral Valley. Based on recent sales, financed sales are still the majority types of sales, which I actually found kind of surprising. This is an area where so many of my borrowers are frequently losing out on bidding wars with cash investors with lower offers.

Lastly, unlike the West Valley where equity sales are starting to pick up (likely due to investor flips) and short sales and REO sales are actually decreasing, the market here in the SCentral Valley is quite the contrary. Short sales and REOs are rapidly rising.

In summary, while the SCentral Valley is still a distressed market due to the number of short sales and REO's in the market, we’re not really a lowball buyer’s market. Buyers who want to purchase a nice looking, halfway decent property here are not only going to have to compete for it with other buyers but they're also going to have to probably pay close to list price or more for it.

Even at these prices though, it's still a deal. If you're looking for a really cheap property at 15% below market or more, you need to be prepared to buy a fixer and you best have a whole lot of cash too.

Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search. The pre-approval process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs. For more info on affordable home loan options, contact me, Donne Knudsen from C2 Financial Corp. at 805.2069123 or donne4loans@earthlink.net.

Other Local Reports for Los Angeles & Ventura counties:

LOCAL REPORT: Simi Valley, CA

LOCAL REPORT: Conejo Valley, CA

LOCAL REPORT: Santa Clarita Valley

LOCAL REPORT: San Fernando Valley (West)

LOCAL REPORT: Santa Rosa Valley (Ventura County)

LOCAL REPORT: San Fernando Valley (NCentral)

LOCAL REPORT: Coastal Communities (Ventura County)

LOCAL REPORT: San Fernando Valley (East)

LOCAL REPORT: Downtown Los Angeles

LOCAL REPORT: Northeast Los Angeles