Monday, February 27, 2006

Running Out of Buyers in the Central Valley

News about the Central Valley housing market has piled up recently. The granddaddy of the bubble blogs, The Housing Bubble blog, had a spate of articles last week about our region. (With all the attention, could it be that the Central Valley's "round soapy things" are poised to pop?)

Home Prices Drop in the Northern San Joaquin Valley

Modesto Bee:

After six years of defying gravity, home prices dipped in January throughout the Northern San Joaquin Valley. Homes sold for a median $386,750 in Stanislaus County, which was about $5,250 less than the record set in December...Sales prices dropped $20,000 in San Joaquin County to a median of $430,000. In Merced County, they dropped $23,750 to a median of $357,000. In Tuolumne County, they dropped $36,250 to a median of $298,750...

"We knew this day was going to come," said Mary Prieto, Prudential California Realty's top-selling agent. She said she has lowered the asking price of some of her listings. One home, in Modesto's coveted La Loma neighborhood, went on the market in the summer with a $595,000 asking price. Prieto took over the listing in November, lowering the price to $549,996. Now it's been reduced to $474,996, which Prieto thinks will attract buyers. "The sellers were asking top dollar when they first listed it. They wanted to try for a high price, like all sellers do," Prieto said. "We're going to go through this adjustment period, with sellers getting out of denial mode and into the reality of the market now..."

And like Bateman, Endsley isn't worried about a one-month drop in housing prices. "The market is coming back to normal," said Endsley, predicting that home prices will appreciate 5 percent to 8 percent in 2006.
New Home Incentives Hit the Southern San Joaquin Housing Market
It seems that the real estate buying frenzy in the Central Valley and in other parts of the state is beginning to slow down. The long lines of buyers at new housing subdivisions aren't that long. In fact, some developers are offering buyers special incentives off their initial purchases...

In the South Valley, average home prices for entry level homes have risen from about $120,000 to $200,000 three years ago. These increases have ended up pricing many first-time home buyers out of the market said Susan Welch, a loan officer for Resource Lenders in Visalia. "The hourly wage rate hasn't increased enough for most workers to afford these escalating prices. The market has gotten a little out of balance and it's time to regroup," Welch said. Part of the reason for the slowdown may have to do with rising interest rates, Welch said. "But the increases are so slight, I think it may have had more of a psychological effect on buyers more than anything else," Welch said.

Welch said that she doesn't anticipate housing prices dropping, although they probably won't continue appreciating at the same rate that they have been... "We won't know for another couple of months if this is a lull in the market or part of a longer-term downturn."
Over 50% of Fresno County's Newly Created Jobs are in Construction

The attempt to slash Fresno County's double digit unemployment rate has created more jobs, but is it enough? The Regional Jobs Initiative says 8,800 new jobs were created between 2003 and 2005. That's far from the 25,000 to 30,000 new jobs above normal growth they were hoping to create by the year 2009...Clearly, the Regional Job Initiative's challenge is to find high-paying jobs outside of construction, which tops the RJI's list with 4,500 new jobs created..."For the first time in 20 years, Fresno County's unemployment has dropped below double digits." But, over half of the 8,800 new jobs created resulted from the Valley's hot housing market. "Construction is not going to keep up with the torrid pace of growth that its had. It will tend to level off," said RJI Co-Chairman Pete Weber.
Building Permits Down in Placer & San Joaquin Counties

Auburn Journal:
Placer County's budget has passed its mid-term exam, but a county analyst is warning to watch for slumping revenues from a slowdown in construction...A recent slowdown in the real estate and building sector markets has resulted in a flattening or slowing of construction permit revenue receipts, she said...Statistics from the Placer County Building Department show a slowdown from last year for both single-family home development and total construction activity. In the July to January period, the number of single-family dwellings in the permit process in unincorporated Placer County dropped from 586 units to 503. The valuation of those units decreased from $164 million to $147 million - or 10.37 percent. At the same time valuation of all permits dropped 10.56 percent from $248 million to $222 million.
The Stockton Record:
Building permits for single-family homes in San Joaquin County were down even more sharply in January year-to-year than in December, a reflection of a slowdown that has some homebuilders cutting prices and offering incentives in the past couple of months. A total of 322 construction permits were issued last month countywide, down nearly 40 percent from 533 in January 2005, according to the Construction Industry Research Board, which tracks the building sector in California. That compares with a 27 percent drop from 463 home-building permits in December 2004 to 338 last December.

Builders say that fast-escalating prices are over as prices rose to levels that began putting off many potential buyers, even in this area, typically seen as one of the most affordable housing markets in this region...

The changed sales market had Oakland residents Stoney and Toni McCree checking out model homes in Mossdale Landing on Friday. The McCrees, who don't own a home now, are aware of the slower market, and they not only think it's a good time to buy, but they also intend to take six months to do it.
Affordability Continues to Decline; Running Out of Buyers

Tracy Press:
The California Building Industry Association released its quarterly figures Thursday that showed that in the last three months of 2005, Central Valley cities continue to be some of the hardest places to buy homes for middle-income families. Merced, Modesto and Stockton are among nine California cities in the top-10 least-affordable urban areas. Eighteen of the 20 least affordable cities in the U.S. are in California, with Fresno, Redding and Bakersfield climbing up the list and Sacramento about to replace San Francisco as the 11th least-affordable city in the country.

"Even with the best programs, interest-only loans and no-money-down, we're having trouble qualifying people."
Stockton Record:
The Stockton metro area is one of the least-affordable in the country and getting worse, according to a survey by the National Association of Home Builders. The survey, which measured the ability of a median-income family to buy a median-priced home in each of 160 metro areas across the country, showed that the Stockton metro area - San Joaquin County - moved from ninth least-affordable housing area in the nation in the third quarter of last year to eighth least-affordable last quarter.There may be relief in sight, with area sales prices having flattened out or even dipped in some cases since last summer, when the number of houses on the market began swelling.

James Abbott, office manager of Coldwell Banker Grupe in Stockton, said that although the market has slowed in recent months, sales prices have still been coming in at almost full asking price on average, even with some houses that were initially overpriced getting marked down. Sellers are more patient these days, though, and buyers finally are getting more time to make offers, he said.


1happyrenter said...

Did you go to the Buyers show at the convention center?

Any reply from Mr. Castro?

arizonadude said...

Most of the new jobs being created are in real estate. This thing is feeding on itself. When the bubble pops where are they going to work?
I have to say bush has done a lousy job with the economy. I am a republican but anyone with a pulse can see the bs going on. Basically all were doing is living on the future. I guess were also giving some of the baby boomers a nice retirement too. This bubble has really seperated the classes too.Rich get richer and poor get poorer.

HighSierraGuy said...


Nice compilation. You're saving me lots of time not having to browse for meltdown stories myself. Thanks.

Lander said...

Did you go to the Buyers show at the convention center?

Any reply from Mr. Castro?

No (unfortunately) & not that I know of, although Mr. Castro has a new, more "general" entry posted at Realty Times (at least for the moment).