City leaders and housing experts in Merced County say interest in homebuilding is beginning to ramp up, a sign of developer confidence in an improving economy.
New homes are going up on the north side of Merced. Los Banos, because of its proximity to the Bay Area, continues to be courted by developers. New development could be a good sign because it typically brings jobs, and upticks in tax revenue and developer impact fees paid to each city.
Developer Greg Opinski, who owns OP Development, said he’s investing about $3 million in the 60-house development dubbed Rosetta Creek LLC, which is a 71/2-acre development east of Highway 59 and south of Cardella Road.
Seven homes are under construction and the rest of the lots will fill out depending on demand from buyers, Opinski said. Merced’s economy is improving, he said, so investing in development makes sense. “It’s not rocket science,” he said. “It’s just a numbers game.”
Opinski said his company has experience in building schools and other public works construction, as well as refurbishing homes. Now that new homes are becoming profitable to build in Merced County again, he said, he wanted to jump into the market. The Rosetta Creek homes range from about $270,000 to $360,000, for 1,877 to 2,944 square feet, respectively.
Across Merced County, 115 homes were sold in April for an average of $170,000, an increase of 24 percent from the same time last year, according to a report from DataQuick. The numbers from April, the most recent available, show that homes in Merced are worth about 23 percent more – at a median of $166,000 – than they were in 2013.
At its height in 2006, the median home sale price in the city of Merced was $350,000, according to DataQuick.
Phillip May, president-elect of the Merced County Association of Realtors, said he expects the development to fill up quickly once the model homes are ready for display.
Bay Area buyers continue to be interested in homes in Merced County, he said, and many have connections to UC Merced.
Bay Area money also plays a role in driving up housing prices in Los Banos, which are the highest in the county at a median of $215,000. That is 38 percent more expensive than this time last year.
The market in Los Banos continues to be tight, said Larry Borelli, owner of Borelli Real Estate Services in Los Banos. There are fewer “steals” and rentals on the market because homes are selling and foreclosed homes have begun to dry up, he said.
Sixty-one homes went into foreclosure in Merced County in the first quarter of the year. That’s down from 169 in the first part of 2013, according to DataQuick.
With only a few dozen homes on the market in Los Banos, there is a demand for inventory, said Steve Carrigan, the city manager. “We have seven builders lined up and ready to go,” he said. “To be honest with you, I thought we’d have more homes built by now.”
Carrigan said it remains unclear exactly what is keeping construction down when so many developers are showing interest, though the housing market crash of 2006 likely makes them gun-shy.
At one time, Merced County had more than 11,000 homes in foreclosure. In the housing bubble of 2004 and 2005, Bay Area commuters, speculators and local buyers – many using subprime loans – pushed prices in the northern San Joaquin Valley. Houses in some Valley towns sold for $800,000 or more before plummeting in value by more than half.
To spur growth, Carrigan said, the city is working on an impact-fee-reduction program that would give developer fee breaks to the first developers to begin construction. “Housing in general makes the entire economy go,” he said.
Housing is the key to pulling Los Banos and the county as a whole out of the Great Recession, he said. Construction creates jobs and gives people income to be cycled around the community through spending.
Juan Villa, a contractor with Merced-based McClure Enterprises, is overseeing the Rosetta Creek construction. He said he has 30 workers piecing together the homes, and his crew could expand with demand.
He said homes going up in Merced were a sight for sore eyes, as he was having to commute to the Bay Area for construction jobs until recently. “This just motivates more builders to come into Merced and start building,” he said. “And it gives the opportunity for people to get jobs.”