"Teetering" Merced

From the Merced Sun-Star:

Merced's housing market is significantly overvalued and teetering on the edge of a downturn, according to a new study. Housing prices have soared to 77 percent above where they should be, which means Merced is "at risk for a price correction," according to the study released earlier this week by financial services company National City and economic information company Global Insight.

"Even though I can't tell you where prices are going soon, I can say that the risk of prices declining within the next three years is very high," said National City Chief Economist Richard DeKaser. When prices dip, they'll probably sink about 35 percent to 40 percent over a period of three years, said DeKaser.

Local real estate leaders say that decline is already under way. "It's already been happening, definitely," said Ray Rodriguez, president of the Merced County Association of Realtors. Rodriguez said he first saw prices going down last fall, but he thinks the market should turn around soon..."We're not as overpriced as people say we are."

Buyers seem to disagree. Developers and real estate agents alike have been forced to slash prices lately. Ranchwood Homes dropped the base price on new homes at its Summit Meadow subdivision in Beachwood this week from $324,900 to $314,900, said sales representative Patty Camacho. "Almost every [listing] that I have has been reduced," said real estate agent Mary Gamel with London Properties. Gamel said she recently reduced the asking price on a McSwain house from $795,000 to $759,000 and dropped a Brimmer Road house from $355,000 to $345,000. That's bad news for out-of-town investors who flocked to Merced looking to buy and then "flip" houses for a quick return. "To those people, I would strongly caution against buying at this time," said DeKaser.