I had the opportunity to attend the Santa Clarita Valley Economic Development Corporation & College of the Canyons 2014 Economic & Real Estate Outlook. It was a full-house at the Hyatt Valencia ballroom where everyone gathered to listen to several experts discuss the health and their outlook on the economy and real estate as it pertains to the Santa Clarita Valley, Los Angeles Metro area, California, and the country as a whole; some international issues that are trending, such as the Ukraine, were even touched on as well.
The experts who presented to the eager crowd included Mark Vitner, Chief Economist with Wells Fargo, Nigel Stout with Jones Lang LaSalle, Craig Peters with CBRE, and Neal Weichel with Re/Max Santa Clarita. The topics that were touched on had to do with the economy (Mark Vitner), commercial real estate (Nigel Stout), industrial real estate (Craig Peters), residential real estate (Neal Weichel), and finally Mark Schniepp with the California Economic Forecast. As a residential real estate guy myself in Santa Clarita, it’s always great to hear about the different sectors of the real estate profession, that have a significant impact on the local jobs market.
Overall, the tone of the conference left me feeling very bullish on not only the Santa Clarita Valley economy, but also the national economy as a whole.
Below are some notes I recorded, highlights if you will, from each of the presenters as I heard them:
Mark Vitner (Economy in general):
– Strong start to the spring home buying season
– Ukraine: the markets shrugged off this event thus far, though he feels a lack of any intervention could lead to embolden some other nations to act/do-as Russia has.
– 2014/2015/2016 will be some of the best years for the US Economy
– Interest rates may come down further due to a lack of Fed Funds rate increases
– Global economy looking better/growing
– Energy & Technology sectors are booming
– Areas that have a diverse jobs market, such as the Santa Clarita Valley, are growing
– There will be a modest rise in SFR construction
– Less people buying second homes
– Los Angeles jobs market growing in-line with the nation
– Buyers with all cash for real estate purchases has dwindled from 40% of purchases down to 20%
– Back-log of underwater homeowners who will wait until market value of their home makes it possible to break-even or even profit
Nigel Stout (Commercial RE):
– Commercial real estate in the SCV is more of a balanced market right now between landlords and tenants. In 2015, the market will favor landlords more so
– Demand is tepid at present
– Tenants should lock in leases now, as market is shifting in landlord favor (possibly due to lack of new commercial space being developed/dropping vacancy rate??)
Craig Peters (Industrial RE):
– Continued improvement in the industrial real estate market
– More businesses moving from San Fernando Valley to Santa Clarita Valley
– Too little supply for industrial space, too much demand
– Prices will increase
Neal Weichel (Residential RE):
– Flip homes seeking top dollar, low interest rates, and buyers removing their appraisal contingencies contributed greatly to soaring home values
– Many upside-down homeowners now right-side up due to home value increases
– Market activity and sales slowed down once interest rates increased summer of 2013
– Bullish on residential real estate market below $450,000; not enough supply
– Mixed bag of results for residential real estate priced between $450k to $650k; must be priced well to get sold
– Homes above $800k, it’s all about pricing and marketing, too much supply in this price range, not enough sales/demand
– Home buyers are more savvy than ever, and are more frugal, too
– Interest rates must stay where they are at to keep the market moving forward
– Investor buyers are mostly gone and are now an insignificant percentage of sales
– Move-up and move-down buyers are driving our current Santa Clarita real estate market
– Santa Clarita Valley needs to sustain job growth in order to keep drawing people to the area
Mark Schniepp (California and Santa Clarita Valley markets):
– Retail sales in SCV at a high in 2013, though when inflation is figured in – it’s not
– Still 12% lower in sales revenue in SCV than we were in 2006
– 2013 best year in Santa Clarita housing sales since 2005
– 2300 jobs created in 2013, in Santa Clarita
– 32,161 homes in pipeline to be constructed in the Santa Clarita Valley
– 10,241 homes approved for construction in Santa Clarita
– Office vacancy rate in Santa Clarita improvements going forward
– 2,350 new Santa Clarita jobs potential with current vacant office supply
– Significant economic growth due to job growth over next several years
– 4,500 Santa Clarita jobs shy of peak in 2007
– Interest rates will remain low
– Corporate profits are at an all-time high
– Most economic trends are going up
– Car sales are going up
– Big growth in US Housing starts
– Unknown issues going forward: Impact of Obamacare, housing sales are slower, will interest only HELOC resets affect the market?, 25% of homeowners are still underwater
– Foreclosures at 7 year low, now at a normal level, Santa Clarita has less than 20 foreclosures a month now
– Housing demand should steadily rise due to population increases/aging
– 22k population increase in the Santa Clarita Valley through 2018, more homes being built are needed for that growth
Over-all, from what I heard, what I see on twitter at #SCVoutlook, and after speaking with my colleagues in attendance, the next several years should be quite prosperous not only in the Santa Clarita Valley, but internationally as well. With home values still rising, albeit at a slower pace, job growth in our local economy and beyond, and financial markets rallying to new highs – one can’t help but get a bit excited at what the next few years has in store. Sure there will be bumps in the road and perhaps some valleys, but let’s just hope for quite a few new peaks, and collectively working toward making it a great life.
As for the next recession, this topic was brought up a few times, however most believe we won’t see a recession again until about 2018, or 2019. It’s 2014, people… let’s make the most of the next few years.
Interested in Santa Clarita Real Estate? Want to chat about the local housing market? Let’s talk! You can call me anytime @ 661-373-2374.
