Central Valley: So Yer Sayin’ There’s A Chance…

Mixed signals are making it quite difficult to predict where the Kern County residential real estate market is headed in the months to come.  Recent headlines from The Bakersfield Californian include:

Then on the flip-side, there’s “Region leads nation in construction job growth.” Hmmm…

New home sales continue to make up a small part of total sales throughout Kern County and beyond at roughly 6%, according to Hanley Wood.  However, it is clear that well located projects with excess finished lot inventory are now appealing to both local and national builders up and down the 99 Corridor (CA SR 99).

The main issue at hand still remains… Although new home sales appear to be picking up, foreclosures and REO’s still make up over 50% of sales, and in many cases, homes are selling for just over $100/Sq. Ft. (Hanley Wood). Many “broken” projects were purchased by investors during the downturn, yet residential lots are still trading at or below replacement cost.

As a consequence, some investors are forced to sell their investments at a loss, or wait until home prices raise so residual lot values eventually increase.

As with every storm, there is a silver lining.  Construction jobs in Bakersfield have recently increased dramatically.  The Bakersfield Metro area added a higher percentage of new construction jobs over the past year than any other market in the United States according to an Arlington, VA trade group. Federal funding from the Thomas Roads Improvement Program and the American Recovery and Reinvestment Act, along with various Health Care industry expansions and upgrade projects are the main contributors to this growth.

In addition, according to Richard Chapman of the Kern County Economic Development Corp., local growth in the manufacturing, warehouse, and distribution sectors has also spurred along recent construction.  Growth and improvement in these areas are so critical as Bakersfield continues its quest to becoming a more dynamic and diverse economy.

Hanley Wood recently ranked Fresno County (#4) and Kern County (#6) in its list of Top Ten California Counties with the highest new home sale projections for 2012.  Land Advisors is asking, “Is this a sustainable positive upward move or just another head-fake?

Source: Jason Hepp, Senior Marketing Consultant, (661) 702-9080

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The American Dream… Renting in the Central Valley?

As the Central Valley land and homebuilding market continues to slog through foreclosures, short sales, and tepid new home sales, many potential homebuyers are waiting out the current real estate cycle until real signs of economic growth emerge.  

  • According to Affiliated Appraisers, the median sale price of a single family home in Kern County rose 0.8% to $132,000 from September to October this year, but decreased by 2.2% year over year.
  • The number of foreclosures dropped 9.9% from September to October of this year, and is down 36.1% since October 2010.
  • October saw 522 closed homes sales (new and resale) throughout the County, down 11.4% for the month and off 7.1% for the year.
  • Properties owned by lenders account for 40.5% of all sales compared with a national average of 30.1%.

Due to the lack of confidence in the economy and homebuilding market, many would-be homebuyers are now turning to renting instead of buying.  According to RealFacts, many potential buyers with good credit who can afford to purchase a home now are electing to wait on the sidelines, and rent an apartment or townhome for a while instead.

Indicative of demand, average monthly rent in Kern County rose 2.8% in the third quarter 2011. The County had the 16th highest rent of 24 metropolitan statistical areas in California.  Its 98% occupancy rate earned it the State’s No. 4 spot on occupancy.  Over the last 3 quarters, rent for two-bedroom townhomes in Kern County increased by 10.7% compared to the previous three quarters.

Kern County is following a pattern typical of inland communities and other tertiary markets… They tend to be the first to collapse and the last to recover.

Source: Jason Hepp, Senior Marketing Consultant, (661) 702-9080 x14