Saturday, September 30, 2006

Bad Hangover for Merced

One Merced home seller is probably not too pleased by this article in the Merced Sun-Star:

At the height of Merced's real estate frenzy last year, Bay Area Realtors drove vanloads of clients through town on the hunt for investment properties. They poured over the Altamont Pass, lured by the promise of cheap houses guaranteed to swell in value when the new University of California campus opened. Now the out-of-town speculators are gone, leaving behind streets lined with For Sale signs and new subdivisions filled with freshly built houses standing empty...

Clearly the real estate party is over -- and in Merced the hangover is bad. "I knew it was going to soften, but I didn't know it was going to slide this quickly," said Mike Salvadori of Century 21 Salvadori Realty...

The frenzy lasted five long years, the longest boom broker Loren Gonella has seen in his 29 years in the business. It peaked in August 2005, when a record 652 houses sold in Merced. Since then the number of sales has dwindled by almost half, with just 369 houses sold in August 2006, according to DataQuick News.

The boom was fueled mostly by the out-of-town investors, creating what Realtor Kay Flanagan calls a "false market" that made selling houses as easy as filling orders at a factory...

Now, the market is shifting back to reality. It's time for what people in the real estate industry optimistically refer to as a "correction..."

Usually it takes about three and a half years for prices to return to a reasonable level after reaching an artificially high peak, said Richard DeKaser, chief economist with National City Corporation, which studies real estate busts...Merced's market, which was one of the most overvalued in the country, could see prices decline by about 35 percent, said DeKaser.

8 comments:

Anonymous said...

I was in MERDEAD a couple of years ago. I kept hearing how everybody was so exicited that their house increased in value by 100K or more. What I could not figure out is why anybody would want to live there. I mean the town is pretty run down. They have this steak joint called the Brandy Iron, I think, food was marginal at best. I was only there for two weeks, but it was a long two weeks.

tom stone said...

a 35% drop? this guy is smoking the strong stuff.

Anonymous said...

I know Merced should have a 50% drop at least.

JR said...

good answer.

Anonymous said...

Cow town w/ a college. 50% haircut is needed.

Anonymous said...

I agree...50% is more likely and appropriate. Merced is an armpit. No appeal whatsoever. Merced ranks up there with Bakersfield and Redding in cultural niceties. But what do I know anyway. I was ranting 10 years ago when people starting buying up the shacks in East Palo Alto which I saw as a scarey place you drive through but never get out or your car at night. Now it's trendy. Maybe Merced will follow along those lines?

JR said...

Hey, quit knocking Redding. They have a beautiful new Calatrava designed bridge over the Sacramento River that puts anything north and east of the Golden Gate to shame. It is very sexy.

Rob Dawg said...

[Warning, the following could easily be misinterpreted as my being racist rather than my observation of racism in society. Consider before attacking.]

We did a drive by tour of UC Merced for my eldest. The campus was a joke. There might be a college experience there in about 20 years with luck. What we learned was that the demographics of actual attendance were very Hispanic. 1/3rd. This is not a bad thing but the perception will hinder growth. They have on campus housing and free parking for all students. The outgoing president assures us it is not in the middle of a cornfield. Instead he jokes it is a cow pasture. He's right.

As we -tried- to leave we got caught in a developement so new no map or digital aid could help us. We finally stopped at a sales office for directions. Sad. We are talking about a place that in two years will be hiring full time tumbleweed control officers.