The groundbreaking on 13 new homes Friday in Merced is a sign of an upswing in development, according to area brokers and government officials.
Developer Bernie Heyne, 72, held a ceremony to kick off his plans to build 13 single-family houses near Anderson Way in north Merced. The Silverleaf II subdivision is a project of his corporation, CenCal Pacific.
Heyne, who also is a real estate broker, said he bought the lots from Envision Homes of Merced. The pads for the home sites are complete, which means construction is ready to go after the developer gets a permit.
The number of houses may not be eye-popping, but Merced has seen few new homes since the housing boom busted in 2006. Brokers and government officials see the development as another sign of an improving local economy.
Heyne said he saw a lack of homes in the area at his project's price range, $215,000 to $225,000.
"It led me to believe there was a demand for housing," Heyne said.
Bank-owned homes are selling at 20 percent to 25 percent more than new ones, he said, another example of the demand for homes in the area.
Charitar Realty owner Roselin Charitar said the housing market in Merced is improving. She said bank-owned homes in the area can draw 20 to 30 bids each.
"Due to a lack of inventory, buyers are offering more for these properties, which means our market is in total recovery now," Charitar said.
Developer warranty appealing
Unlike resale homes, new houses come with a developer warranty and sell to the first qualified buyer. Charitar said that appeals to families looking for a home.
Builders are going to be looking to put homes on existing pads in Merced, according to David Gonzalves, Merced's director of development services.
Gonzalves said the price for building homes has reached a point at which builders again can be profitable.
"We're going to start seeing houses in small quantities pick up in the next six months to a year," he said.
With interest rates near 4 percent, Gonzalves said people can afford homes in Merced. So, the demand is there.
Gonzalves said developers are in his office regularly these days asking questions, and lots are beginning to sell.
"That's the first step, people that purchase lots," he said. "So, they're not just tire-kickers."
As interest rates creep upward, many buyers want to get in before they're unable to qualify, said Mike Salvadori of Century 21 Salvadori Realty.
The 36-year veteran of real estate in Merced said June was one of his company's best months for existing home sales in the past five years.
"Interest rates have gone up almost 1 percent in a very short period of time," Salvadori said, "which is a pretty big increase."
'Very strong' market seen
Salvadori described the housing market as "very strong" and said investors from out of the area continue to buy homes in Merced.
Those homes most often are turned into rentals. Salvadori said if the rental market begins to soften, housing prices could be adversely affected by a flood of investors looking to sell.
"Someday in the future, those folks that are buying these rentals are going to put their property back on the market," Salvadori said. "Then you'll have a huge amount of properties going on the market."
Reporter Thaddeus Miller can be reached at (209) 385-2453 or email@example.com.