Developers offer new homes in Modesto area. But will it relieve the housing shortage?

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Housing in Stanislaus County

Investigating how renters and homebuyers are making it work as the cost of living rises in Stanislaus County.

It used to be that rising rental costs were prime motivation for residents to use their earnings to purchase a home.

Thousands of renters became buyers in those pre-recession days in Stanislaus County when the nine cities and a few unincorporated towns were sprouting new housing subdivisions.

Today, there is a limited selection of newly built homes for first-time or other potential buyers in the Modesto area. And the prices are out of reach for many saddled with increasing rent payments for an apartment or house.

Still, a recent drop in interest rates creates opportunity for home shoppers this fall, according to the few developers putting new homes on the market in Modesto.

“We have seen very good traffic coming through our Modesto project,” said Randy Bling, president of Stockton-based Florsheim Homes.

Florsheim has sold the 43 homes in the first phase of Icon at Inspiration next to Vintage Faire Mall — after opening the models in July — and is working on improvements for Phase II of the 154-lot project. Prospective buyers on Saturday can preview the 73-home Metro at Inspiration, a sister project to the more upscale Icon.

This week, interest rates for a 30-year fixed home loan are around 3.5 percent.

“We feel the market is strong now,” Bling said. “Interest rates were pushing 5 percent in November of last year and have come down considerably.”

Dennis Fitzpatrick, president of Fitzpatrick Homes in Salida, said the low rates give home shoppers greater buying power. Fitzpatrick has a grand opening Saturday for a model in the 47-lot Faircrest Luxury Living, off Oakdale Road and south of Sylvan Avenue in Modesto.

Starting at $376,000, the Faircrest homes are moderately priced by today’s standards in Modesto, with designs ranging from 1,446 square feet to 2,088 square feet. Luxury features such as granite countertops and stainless steel appliances are standard in these homes.

Fitzpatrick said the 47 lots were originally part of a residential development more than a dozen years ago and sat vacant during the recession and economic recovery. He expects to sell homes to first-time and move-up buyers, with 80 percent coming from the local area. An estimated 20 percent will be commuters.

The ongoing home construction in the Tracy Hills development near Interstate 580 in Manteca is attracting most of the Bay Area commuters looking to buy, developers said.

Prices determine how fast homes are sold today. Fitzpatrick said it has taken more than a year to sell large homes priced from $579,000 to $714,000 in an upscale Turlock neighborhood, while smaller homes in Waterford priced in the high $200,000s sold out immediately.

The developer said 75 more homes in Waterford for first-time buyers are coming in the spring. The Edgewater project will offer 3-bedroom homes near Moon Primary School, ranging from 1,200 to 1,400 square feet on 6,000 square-foot lots.

Bling said one advantage in selling Icon homes is the lower costs of the community finance district. Prices have ranged from the mid-$300,000s to high-$400,000s.

Florsheim built 200 homes last year and has all but sold out the homes in the Rose Park developments near Floyd Avenue and Claus Road on Modesto’s eastern edge.

“After these projects, we don’t have anything else in Modesto,” Bling said. Florsheim still has 25 lots available in Rose Verde in Turlock.

Sales began at KB Home’s 80-unit Orchard Terrace development in Ceres in May 2018 and continued at an average clip until seven were left this week, a sales representative said. A mixture of local and out-of-town buyers purchased 73 of the homes, priced from $342,000 to $391,000.

To purchase a home for $350,000, a first-time buyer would need to put at least 3 percent down, or $10,500, and pay closing costs. Their monthly payment for the home under a conventional 30-year mortgage could be $2,100 to $2,200, including taxes and insurance. That monthly payment is 30 percent of gross income for a household with $88,000 in annual earnings.

It’s out of reach for many folks in a county with median household income of around $55,000 a year. A Modesto resident paying the average apartment rent — $1,220 per month — is facing almost a $1,000 jump in monthly housing costs with that kind of mortgage.

There are numerous loan programs for buyers who are eligible, some offering down payment assistance. An example: the MyHome Assistance Program through the California Housing Finance Agency.

It’s a shorter leap to owning a new or existing home for families paying the median rental home cost in Stanislaus County, which is $1,650 per month. According to Zillow, the median sale price for homes in this county was $317,400 in late July. At current rates, a buyer who can make a 10 percent down payment for an average home purchase could be looking at an $1,816 monthly payment, including taxes and insurance.

It is more difficult in today’s home construction industry to build affordable homes for consumers while still turning a profit.

Fitzpatrick said land prices are steep due to scarcity of finished lots and a limited amount of land zoned for residential. The Great Recession caused much of the labor force to leave the industry, so labor costs are a challenge as well.

Bling said fewer drywall companies remain in business and recent trade wars and tariffs make building materials more expensive.

Regardless of the challenges, Florsheim and Fitzpatrick Homes, two companies with deep family traditions, will keep looking for opportunities.

But it does not appear that new home construction will cure a housing shortage that’s a burden for renters in Stanislaus County.

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Ken Carlson covers county government and health care for The Modesto Bee. His coverage of public health, medicine, consumer health issues and the business of health care has appeared in The Bee for 15 years.