Written by The Business Journal Staff
At a recent sold-out event hosted by the Building Industry Association (BIA) of Fresno/Madera Counties, Sullivan said former home owners pushed out of the market during the 2008 financial crisis are ready to jump back in after waiting for their credit to recover.
“A number of households that went through short sales or foreclosures between 2008 and 2010 are seeing their credit recover and getting back to a place where they can qualify for a mortgage again,” he said.
Sullivan’s prediction comes on the heels of a new report from Realtor.com, which named Fresno the nation’s 15th hottest housing market in August.
At the BIA forum, Sullivan pointed out that during the Great Recession, Fresno home values declined an average of 42.5 percent. Even with the market stabilizing and beginning a recovery in 2010, today, Fresno home prices are still roughly 21 percent below their pre-recession highs, he added.
One potential roadblock to a full-blown recovery, Sullivan said, is the fact that about 70 percent of the new home subdivisions around the Valley are priced above the FHA limit for new home purchases.
Mike Prandini, CEO of the Fresno-Madera BIA, agreed and said he believes the Valley’s relatively low household income levels could put a damper on a potential 2017 housing boom. Nonetheless, Prandini said this week that he is seeing “cautious optimism” among area homebuilders going into the fourth quarter.
“There has been some talk lately about increasing [new home] inventory but builders don’t want to get too far ahead of the curve,” Prandini said. “My builders are constantly monitoring [potential] homebuyer interest and are adjusting their models every week.”
“Right now, we’re only building a few thousand units a year in Fresno County,” Prandini added. “I know the demand is higher than that.”
Sullivan, regarded as one of the country’s leading experts in residential real estate planning and development, also predicted the market could be buoyed as more and more millennials begin to form families and become first-time buyers.
“Many baby boomers are also deciding that they don’t need houses with big yards and three-car garages anymore and those homeowners are making the decision to downsize,” Sullivan said, adding that trend could create additional opportunities for would-be so-called “move up” buyers.
In addition to Sullivan, other professional real estate watchers participating in the September BIA forum included Madera County Planning Director Norm Allinder and Fresno County Deputy Planning Director Bernard Jimenez.
Randy Jackson, president of PlaceWorks, a Santa Ana-based firm that specializes in preparing general and specific plans for many local Golden State jurisdictions, also participated in the panel discussion.
Any discussion regarding the Valley’s future real estate growth and development would be incomplete without addressing the drought — and the area’s dire water challenges. Jimenez told forum attendees that Fresno County is working with other affected agencies to develop “a comprehensive plan” for basin-wide groundwater management.
“This is something that will impact everyone as we either have to reduce our water usage or find a way to bring water into the area,” Jimenez said. “We will need to have an extensive plan in place by 2020 to achieve long-term groundwater sustainability.”
Andy Nazaroff, president and CEO of Guarantee Real Estate, the Valley’s largest residential real estate seller, said this week that he believes there is a flaw in some of the projections that came out of the BIA forum.
“The majority of short sales and foreclosures took place between 2008 and 2010,” Nazaroff said. “Those people only had to wait three to five years to buy again and all of our research shows that most of those buyers were back in the market by 2013.”
Nazaroff, who did not attend the BIA forum, estimates that about 20,000 homeowners around the Valley were displaced due to short sales or foreclosures.
“If there are a flood of buyers in 2017, what are those people going to buy?” Nazaroff said. “What we really have is an inventory problem. Seventy-five percent of activity in the marketplace is happening at the under $300,000 level and there is a real shortage of inventory in the first-time buyer/seller category,” he added.
Nazaroff said the market right now — and next year as well — is “perfect” for first-time sellers who have solid equity in their homes because while there is a dearth of lower-priced homes on the market, “there is a surplus of trade-up inventory.”
“In my opinion,” Nazaroff said, “what we have now is a lot of [potential] first-time sellers not necessarily ready to put their home on the market. They’re afraid they won’t be able to buy anything to replace their homes with because they still don’t have enough equity” to move up.
Veronica Stumpf, a real estate broker with Stumpf and Co. who focuses on the growing Downtown Fresno market, especially investment and commercial properties, said it’s hard to say whether 2017 will bring a new wave of rehabilitated buyers.
“The residential real estate world has, for the most part, stabilized in past months,” she said. “But it could be the calm before the storm.”