Real Estate

Saturday, Oct 13 2012 09:00 PM

New home construction surges

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    By Casey Christie / The Californian

    Chris Pursel with Control Fire Protection, Inc. installs fire sprinklers in a Gracie Home being built in the Rosedale area.

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  2. 2 of 8

    By Casey Christie / The Californian

    Chris Pursel, with Control Fire Protection Inc., installs fire sprinklers in a Gracie Home under construction in the Rosedale area.

    click to expand click to collapse
  3. 3 of 8

    By Casey Christie / The Californian

    Chris Pursel with Control Fire Protection Inc. installs a fire sprinkler system in a Gracie Home under construction in the Rosedale area.

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  4. 4 of 8

    By Casey Christie / The Californian

    A home with a sold sign on it in Rosedale is being built by Gracie Homes.

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    By Casey Christie / The Californian

    A silhouetted Jose Sanabria with Prather Drywall sets up his equipment for a drywalling job in a Gracie Home under construction in Rosedale.

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  6. 6 of 8

    By Casey Christie / The Californian

    Jose Sanabria with Prather Drywall and crew prepare to drywall a Gracie Home in the Rosedale area.

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  7. 7 of 8

    By Casey Christie / The Californian

    Prather Drywall workers put in a busy afternoon drywalling a home under construction in Rosedale.

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  8. 8 of 8

    By Casey Christie / The Californian

    Prather drywaller Uriel Rojas sands the walls before drywalling a newly constructed Gracie Home in Rosedale.

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BY JOHN COX Californian staff writer

A mini-boom years in the making has finally come to Bakersfield's new home market, bringing with it local construction jobs and a welcome dose of optimism, though not yet the pre-bust property values existing homeowners have been waiting for.

Concentrated in the city's northwest and southwest, hundreds of entry-level and even mid-range homes are going up in neighborhoods left unfinished by the market's nosedive six years ago.

This increase in building activity over the last few months is driven to a large degree by strength in oil and agriculture. Homebuilders say it may be a sign that the real estate market -- the biggest holdout in Bakersfield's gaining economic recovery -- is solidly on the road to recovery.

At the same time, the new construction is supported by a particular combination of factors, some of which -- low interest rates and inexpensive lots, for example -- are not likely to persist. As such, it is unclear how long the surge will last and how widely its benefits will spread.

Still, developers say they are encouraged at how busy they are keeping despite tough mortgage lending standards and rising construction costs. Many have decided to play it safe by limiting their work to pre-sold homes, but that's partly because any speculative projects quickly move over to the pre-sale column.

Bakersfield homebuilder Matt Towery predicted sustained growth in local home construction. Unlike the boom years, when many home sales were fueled by subprime lending and stated incomes, he said, "the demand is real; it's not manufactured."

He reported selling 37 new homes so far this year, up from 27 during all of last year. He has 52 more units now under construction, some geared toward first-time buyers and some for higher-end customers.

"If you'd asked me this two months ago, I'd have been more cautious. But I really do think (a recovery) is here," Towery said.

So does Greg Alvarado, owner of Bakersfield's Gracie Builders Inc. He said historically low interest rates have greeted people ready to re-enter the market after losing their homes to foreclosure about three years ago.

"It's almost like five years ago there was a perfect storm for a bubble, and right now there's sort of a perfect storm for a boom," said Alvarado, whose company has been building four- and five-bedroom homes in Shafter and northwest and southwest Bakersfield. He expects to begin construction soon in east Bakersfield.

Carlos Jaimes is typical of one segment of buyers crowding the local market. The 33-year-old father of two was unable to keep up payments on his home in Old Town Kern when in 2006 he was laid off from his job moving around charter jets at Meadows Field. He and his wife ended up losing the house to foreclosure.

Since then Jaimes has found steady, good-paying work on local oil rigs. That and some work on his credit score allowed the couple to buy a four-bedroom, two-bath home near Panama Lane and South Union Avenue.

"I didn't think I was going to be able to get another house," he said, adding that being able to watch his home progressing through phases of construction was "a pretty good experience."

The numbers

Evidence of the construction boom shows up in Bakersfield building permits. Through August, developers had pulled 715 permits, which easily outpaced last year's total of 422.

Several people in the industry said the current rate will probably eclipse 2010's year-end mark of 816, and may even be enough to match 2009's tally of 1,087.

Local builders said it's unlikely local home building activity will catch up any time soon with 2005's high water mark of 5,216 home construction permits. But they called that level of construction a clear indication of an overheated housing market, saying 1,500 to 2,000 permits a year is probably closer to normal.

Local appraiser Gary Crabtree, a close observer of the local housing market, said homebuilders are clearly reacting to a "severe shortage" of homes listed for sale in Bakersfield. The latest data he had suggested that only 580 homes were listed across the city, which some brokers said was scarcely enough for a month's worth of demand.

"What we need more than anything is inventory," said Scott Tobias, president of the Bakersfield Association of Realtors and broker-owner of Prudential Tobias Realtors.

"If we had more houses to sell, we'd be selling more houses," he said. "Because we've got buyers."

Also helping with the construction surge, Crabtree said, is a strong increase in prices. The new home sales he tracks show that the city's 2012 median price increased to $226,500 through August. That represents a nearly 11 percent jump over 2011's year-end median, which is defined as the point at which half the prices were higher and half were lower.

Does this mean the housing market is back to full health? Crabtree doesn't think so, given that prices are still well below the highs hit prior to 2007.

"We still have a very, very long way to go," he said.

The labor side

In the meantime, the new construction is providing jobs in a sector hit hard by the recession. What's more, the multiplier effect of one new construction job typically supports three new jobs in other fields.

"That is obviously a good thing, to help us to look at the economy," Crabtree said.

But there's a kink in the local dynamic: So many laid-off construction workers left the field for oil work that now there's a shortage of available labor.

This means that as building activity heats up, rates charged by subcontractors are rising as well, said Greg Gibbons, a partner at Bakersfield-based Gibbons & Wheelan Construction.

"We're getting increase notices every week from our subcontractors," he said. His hope is that home prices continue to increase so that developers can still make a profit.

Special factors

Trends are in play that favor homebuilders. And although they are closely linked to the bust that held back the home market in recent years, many now see them as growth drivers.

As local property managers have reported, so many Bakersfield homeowners lost their homes to foreclosure in recent years that they ended up renting houses and bolstering the local rental market.

Investors took notice of Bakersfield's rising occupancy rates and responded by buying up fourplexes, apartment buildings and even single-family homes, according to Bakersfield Realtors and multifamily housing brokers.

Gibbons said this has contributed to the shortage of homes for sale.

"That doesn't leave any inventory for people to buy homes that are in that market," he said. "So new homes are a pretty good answer."

Another big factor in the construction surge has been the availability of fully approved subdivisions just waiting to be developed.

In the boom years, many developers aggressively bought up vacant local real estate and began the expensive and time-consuming process of carrying it through the entitlement process. Then, when the bust hit, many had to walk away from these projects, taking significant losses.

Now that demand for homes has begun to recover, these unfinished lots are changing hands, often at a significant discount to what it cost the original developer. It's also speeding up the construction process.

Vernon Gunter, a Bakersfield developer-broker with Miramar International Commercial, said his company got a good price on a fully entitled, partly built subdivision near South Union Avenue and Berkshire Road. It plans to build 59 three-bedroom, two-bath homes on the lot, with prices starting at $159,900.

Without providing specific dollar amounts for his project, Gunter said that lately homebuilders have been able to pick up 20-acre subdivisions for as little as $15,000 a lot. He said that's less than half what it cost developers to bring the property to that stage just a few years ago.

Of course, there are only so many opportunities like that available.

"That in itself is creating an advantage to get the building started now," he said.

As things stand, that particular subdivision is already home to 13 fully built houses, none of which were sold until last year.

This presented quite an opportunity for Ofelia Nolasco. A foster mother, she paid about $170,000 about six months ago for her first home -- a brand new four-bedroom house in the neighborhood now known as Berkshire Place. She called this opportunity "a miracle."

Although she would prefer to see a park built at the empty lot across the street from her home, Nolasco likes the idea that it will eventually provide some buyer the opportunity to own a home.

"It's good that they build more affordable homes in this economy," she said.

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