Friday, June 22, 2007

Not all doom and gloom for local real estate

Not all doom and gloom for local real estate
Slow but steady job growth keeps some construction going

BY JENNY SHEARER, Californian staff writere-mail: Saturday, Jun 9 2007 8:30 PM
Last Updated: Saturday, Jun 9 2007 8:33 PM

What's up with Bakersfield's housing market?

New home construction has slowed, but it hasn't stopped.

Where there's job growth, there's new home construction, said Delores Conway, a real estate economist at the Lusk Center for Real Estate at the University of Southern California. Bakersfield had 5 percent job growth in 2005 and about 4 percent to 41/2 percent in 2006.
Bakersfield's job growth has dipped to 3 percent year over year. But that's still significant, Conway said, ahead of the national average, which is about 1 percent.

From January 2000 to April 2007, Kern's workforce has grown 19 percent, from 287,900 to 342,400, state labor figures show.

Sectors such as service, professional services and government have roughly kept pace with the county labor force's growth.

Construction jobs have nearly quintupled that growth. Meanwhile, farming jobs have decreased.
As job growth has tapered slightly, so has new construction.

The number of single-family home building permits filed in the first quarter of 2007 was 1,187, compared with 1,874 in the first quarter of 2006, a 37 percent decline, according to the Construction Industry Research Board, a nonprofit that tracks statewide building activity.
Phil Burns, Bakersfield's building director, said some residential developers are holding off pulling building permits or delaying their projects.

As of May 31, 883 permits have been pulled this year. Burns said 1,692 permits were issued during the same period in 2006.

Statistics show sales of existing homes in Kern County have dipped.

First quarter 2007 sales were about 800, compared with 1,230 in the first quarter of 2006, Conway said.

In April, 204 new homes were sold in Bakersfield, compared with 256 homes in April 2006, according to information from Gary Crabtree, a local real estate appraiser.

The new home median price for April was $297,250 compared with $342,000 in April 2006.
When the number of people buying homes decreases, builders reduce "the numbers of new homes that they are building to match the reduced demand," Conway said.

Dale Casey, division office president of Standard Pacific Homes in the Central Valley, said the company is building more than 600 homes here. The national builder has been in Bakersfield since March 2005.

"We're here to stay in Bakersfield," Casey said.

Although the company isn't doing so now, "we might sell some lots and reinvest somewhere else in Bakersfield or trade some lots with another builder," Casey said.

James Manley, a Santa Monica-based developer, said he believes Bakersfield may add 3,500 to 4,000 units a year, which he sees as sustainable.

"We like Bakersfield. (It has) affordable housing, reasonable government," Manley said.
Manley plans to build nearly 800 homes along Panama Lane, closer to Highway 43.
But his construction dates may change depending on the market.

"Our best guess is the marketplace in Bakersfield will be right in 2008 and 2009 to bring our product online," Manley said.

A commercial real estate executive with Castle & Cooke said there's a demand for retailers.
"Buildings that have been empty for quite some time (are) being remodeled for new tenants coming to town" and for businesses looking to expand, said Bill Sampson, senior vice president, commercial properties.

In December 2002, Bakersfield's commercial vacancy rate was 9.9 percent, Vincent Roche said, and 11.6 percent in southwest Bakersfield. Roche is senior vice president, retail properties at CB Richard Ellis.

By December 2006, Bakersfield's overall vacancy rate was 4 percent and 2.2 percent in the southwest.

These figures don't include the Valley Plaza or East Hills malls, Roche said.
Commercial properties take longer to build because of required environmental reports and the entitlement process -- zoning, city council approval, air quality and traffic studies. Those approvals can take two to four years, Roche said, or even longer.

Castle & Cooke sees a strong pace to the residential market. "Although the market has changed considerably, individuals are still seeking to purchase new homes," said Renee Massey, communications manager.

A development executive with the Corky McMillin Cos. says the Bakersfield market is a good one.

"I have had my license for about 20 years," said Carrie Williams, vice president for new home sales. "Besides the last four to five years, Bakersfield has never really experienced that type of a market. The market that we are in right now feels like a more normal, typical market."
The slowdown in the housing market doesn't concern Stanley Grady, the city's development services director. He predicts Bakersfield will see more cottage projects, smaller lots with common areas, such as what Castle & Cooke is doing with its University Park development at Gosford Road and Ming Avenue.

"There's plenty of time for a housing cycle to go through its adjustments and readjustments to market conditions," he said. "It's never on or off. There's always a cycle; we don't know how long this one is going to last."