by: Marc Fischer
It was only a matter of time before the housing bubble burst, yet some believed this community was protected from a downturn. For awhile real estate experts have debated whether the housing market in the western region of the San Fernando Valley would suffer from the crisis in the housing market. Unfortunately, reality has caught many residents off guard, as they believed the good times would never end.
In the years prior to the current crisis, the West Valley experienced a rapid appreciation in home prices. In 1997 the median home was valued at $155,000 rising four fold to $660,000 by May of 2007. Real Estate had been considered the safest investment bet for 10 years running; well not anymore.
Realty Agent Guy Idan of Panorex Realty states, “I have never seen a market downturn this severe. We all knew this day would come, but were expecting a much softer landing. Plenty of people try to sell but there are too few buyers available to suck up the excess inventory creating downward pressure on prices.” In this section of Los Angeles County, median home prices fell on average 22.6% in the last year alone and values continue to trend sharply lower. Chatsworth, Woodland Hills and Granada Hills lead the decline with 26.7%, 26.3% and 25.9% reductions in value, respectively.
West Valley residents have pondered why the Real Estate market has crashed so hard. Most experts blame inflated home prices and lax loan approval standards for the current crisis. Over the past decade, middle-income homebuyers were encouraged to opt for “exotic” mortgage loans when buying into the market as adjustable interest rate and interest only mortgages were marketed aggressively. This year a large portion of these teaser rates reset, causing mortgage payments to rise 50% or more in some instances. Few homeowners were prepared for this unwelcome financial burden.
The West Valley’s housing market has been turned on its head with foreclosures rates shooting up 435% while home sales have simultaneously fallen 54% from their 2007 highs. California now accounts for twice the national average in foreclosures and this trend shows no sign of slowing, especially in this community. Overshadowing any light at the end of the tunnel is the fact that individuals who go through foreclosure have their credit ratings ruined for 7 years and will find it virtually impossible to secure a future mortgage or financing.
Raffi Tal, COO of I Short Sale, Inc. explains, “We have seen significant increases in demand for short sale services over the past year. Our advisory firm works to find solutions to help homeowners avoid foreclosure and relieve them from the burden of debt. We negotiate directly with lenders to modify loan terms but in many cases it is not enough. The bottom line is that we are seeing more and more West Valley homeowners seeking to short sale their property.”
A “Short Sale” occurs when a homeowner sells the property for less than the debt owned. The lender accepts the transaction therein freeing the borrower completely from the debt owed. Short sales have shown their significance when resolving concerns involving increasing mortgage rates and declining home equity values. It’s no wonder that the short sale option has become one of the most popular Real Estate transactions here in the West Valley during these dreadful times.
Industry experts argue amongst themselves to when housing market will bottom out. The Real Estate Journal recently published their predication for a housing recovery in mid to late 2009. According to Tal of I Short Sale, “This is an optimistic projection; but there is no question that the increase in short sale transactions is a positive contribution to the recovery process.”
Tal continues, “Homeowners need to be educated about the options to prevent their home being foreclosed upon. Our company has prevented over 1,000 foreclosures in the Los Angeles area over the past 2 years alone, many of them in the West Valley.”
