It’s been a strong autumn for the Northern San Joaquin Valley housing market. Home sales prices are up, foreclosures are down, apartment rents are edging higher and new-home builders are returning.
Take Merced County, for example, where houses typically sold for $120,000 or less from 2009 through 2012. Home prices have soared there this year, increasing to a median $175,000 during September, according to DataQuick statistics.
San Joaquin County homes are fetching increasingly high prices, with September’s median price hitting $235,000. That’s a 32 percent increase in one year, the highest gain in the entire Valley.
Stanislaus County prices also have risen significantly this year, but they dipped a bit last month to a median $180,000. That’s still 25 percent more than September 2012.
“There has been a shift in the local real estate market,” confirmed Chad Costa, co-owner of Re/Max Executive realty. “We went from significant month-over-month increases from the beginning of the year to a much-needed plateau in just the last month or two.”
Costa fears home prices will soar too high. “We are moving out of a depressed market, and the last thing we need is to see price increases exceeding the average income,” he explained. “History has proven that what goes up must go down, especially when the increases are not in line with income and unemployment.”
There aren’t as many homes with multiple purchase offers or cash-rich investors outbidding families now as there were earlier this year, according to Costa.
“Now we are not only seeing conventional offers accepted, but in many cases, FHA and even VA offers are being accepted,” Costa said. “This is very encouraging to buyers that have felt discouraged for several months.”
This year’s higher housing prices are helping lower foreclosure rates throughout the region, a DataQuick analysis contends.
Here’s why: Rising home values reduce the number of homeowners who owe more on their mortgages than their homes are worth. That makes it easier for those having trouble making mortgage payments to sell their homes or refinance their loans to avoid foreclosure.
This July through September, only 515 homes were lost to foreclosure in the Northern San Joaquin Valley. Compare that to the same months in 2008, when 8,317 homes were foreclosed in Stanislaus, San Joaquin and Merced.
The stabilizing housing market is encouraging builders to consider opening new developments.
“Everything is pointing toward new-home builders starting on a small scale again,” said Bob Florsheim, who co-owns Florsheim Homes with his brother. Their Stockton-based company has built numerous subdivisions throughout the region, but not many since the housing market crashed in 2007.
“We were lucky,” said Florsheim, noting that his firm had graded the land and was ready to launch a new Modesto development in mid-2007. Florsheim pulled the plug on that project just as the recession hit, sparing the company from a potential disaster.
After patiently waiting six years for Stanislaus County’s housing market to recover, Florsheim this summer started building seven homes in a Ceres subdivision called Valley Verde. So far, five of those houses have sold.
So this month, Florsheim took the first steps to revive its northeast Modesto project by filing new plans with city officials for the property near Mable Avenue and Oakdale Road. Back in 2007, Florsheim’s plan was to build 22 “affordably priced” duets there, plus 120 regular houses. Of course, that was back when a $250,000 house was considered cheap.
Now Florsheim plans 114 houses on larger lots there, but construction isn’t expected to start until at least next year.
Any home construction would be good news for Modesto. So far this year, only 17 building permits for single-family homes have been issued in the city. Compare that with 2001, when Modesto issued 1,435 new-home permits.
The region’s building boom, which lasted from roughly 1999 through 2006, affected more than just the market for single-family homes. It affected apartment complexes, too – and not in a good way.
Bobby Atkins, who manages Modesto’s Crown Ridge apartments, recalled how difficult it was to keep renters during the boom. “Everyone could get a mortgage back then,” said Atkins, noting how many apartment-dwellers opted to buy homes instead of renting. That drove up vacancy rates and forced apartment complexes to do whatever they could to attract tenants.
Since 2006, more than 83,000 Northern San Joaquin Valley homeowners have lost their houses to foreclosure, and many of them returned to renting. Despite that, apartment rents have barely budged in seven years. RealFacts, which tracks apartment rents, shows Modesto’s rental rates had been virtually flat since 2006. That changed a bit during the last quarter, as average rents edged up to $827 per month. That’s a 2.9 percent increase over last year.
“It’s too early to tell,” Atkins said about rental rates continuing to rise. He said there haven’t been significant increases at his 184-unit complex. “Most rental properties (in Modesto) have been $100 to $150 per month below projected market rents.”