Local News

Friday, Jul 05 2013 12:00 PM

Homebuilding activity picks up, even as inventory grows

BY JOHN COX Californian staff writer jcox@bakersfield.com

If the current pace holds, this may turn out to be the biggest year for Bakersfield homebuilding since 2007.

As of Sunday, the end of 2013's first half, Bakersfield's Community Development Department says it issued 627 single-family home permits in 2013.

By that point last year, the total stood at 514. The 2012 year-end tally ended up being 1,096 -- the best performance since 2007's total of 1,842 single-family home permits.

In other words, local homebuilders are on pace to have their best year since the start of the recession.

"It's all very positive, and the reason it is is, No. 1, we have a shortage of inventory," said Scott Tobias, broker and owner of Bakersfield's Prudential Tobias Realtors. He added that the surge in new home construction is good for builders, good for construction workers "and it's positive for the homebuyers because there's something to buy."

Although the shortage of homes on the market has helped push prices higher, it has also frustrated Realtors and buyers who have had a hard time finding something to buy.

It's unclear how much longer the surge in homebuilding will last. That's partly because mortgage interest rates are rising, which could cut into demand from buyers.

Also, more existing homes are gradually being put on the market, which could lower prices and reduce the need for additional inventory.

Figures provided by local appraiser Gary Crabtree show that the number of existing homes on the Bakersfield market increased by about 22 percent since May 13 to 633 active listings. He added that fewer foreclosures and other distressed properties are being listed for sale lately.

Another factor that could limit new homebuilding is the cost of vacant lots. Many of the new homes being built are going up on property that was left undeveloped after the housing bust. As the supply of raw land dries up, homebuilders will have to pay higher prices for new lots.

Crabtree, whose local market analyses have garnered a wide following, predicted that Bakersfield's current pace of homebuilding will continue "as long as the existing inventory, or the supply, remains low."

But he said there's no guarantee of that, especially with prices rising to the point that many local homeowners are no longer in a position of negative equity, meaning they no longer owe more money than their homes are worth.

It's possible that local home sales will soon slow down "and become more of a normal market," he said.

That might not happen until after the summer homebuying season, he said: "The heat will probably stay, figuratively and physically."

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