Home building slow to recover in small Fresno County cities

New home construction has been on the rise in Fresno County’s large metropolitan areas, but is slow to rebound in smaller cities where the housing bust hit just as hard.

Kerman — once considered one of the county’s fastest growing cities — had only one single-family building permit pulled last year, and none in 2011. By comparison, in 2005 the city issued 282 permits.

Fowler, Kingsburg, Parlier, Reedley and Sanger also saw new home building permits hit a high during the boom before crashing in 2011.

Housing experts and city officials say the recent uptick in new home construction hasn’t yet hit small communities, where high lot prices, low appraisals, and lingering uncertainty in the market remain a challenge.

“Smaller communities lag larger cities,” said Robin Kane, a Fresno real estate expert. “Until Fresno gets up and running and going stronger, the smaller communities will be held hostage.”

In Fresno and Clovis, builders have unveiled at least 10 new neighborhoods on vacant lots and half-finished developments since August. More are on the way.

But on Kerman’s west side, signs of the housing downturn remain. Concrete walls hide the vacant single-family lots along West Whitesbridge Avenue, where dirt hasn’t moved in years.

The only new building is Hacienda Heights, a 68-unit apartment complex that opened in December on the edge of a housing tract at Gateway Boulevard and Siskiyou Avenue.

Mitch Covington of RM Covington Homes built the complex, but the developer is Westlake Village-based Willow Partners LLC, which also developed Kearney Palms, the city’s senior housing complex.

“It was a much needed project,” said Covington, who during the boom years built about 100 houses a year in Kerman and Madera. “Kerman needs more apartments.”

That’s a stark difference from the early to mid-2000s when single-family homes in Kerman were in high demand before the downturn forced many people out of their homes.

Apartment development is now at an all time high to meet the needs of displaced families, said Kane, senior vice president of Hendricks-Berkadia, a multifamily investment banking firm in Fresno.

And in small cities, state tax credits and grants are often available to help pay for the projects, Kane said.

Covington wants to build more apartments in Kerman, but the city needs more houses, too, he said.

The problem: finished lots are too expensive, and home appraisals are too low.

“Fresno and Clovis have an established lot value that you can build a house on and make a small profit,” Covington said. “The available lots in Kerman do not allow for a viable profit to be made that makes common sense.”

National builder Lennar Homes, which built in Kerman during the boom, has not returned because it could not find a way to make the numbers work, said Mike Miller, Lennar’s Fresno division president.

The builder does not own any property in Kerman and does not plan to return anytime soon.

Still, other developers and investors that own finished lots or have tentative maps recorded are interested in building again, said Luis Patlan, city manager and planning director.

“I suspect in the next 12 to 18 months we might see some movement,” Patlan said.

Covington plans to pull at least five building permits soon. He bought five lots in an existing development on the west side of Kerman and has the option to buy another 16, he said.

“I’m familiar with what’s there in Kerman and as long as I can keep finding product and the lots … I’m going to buy some more,” Covington said.

Mike Prandini, executive director of the Building Industry Association of Fresno and Madera Counties said the new-home industry is going to recover slowly.

“I don’t think the market has recovered sufficiently enough to say ‘lets buy something new in Sanger, Reedley, or Selma,’ ” Prandini said.

Once the larger areas gain momentum and prices start to rise, then people will start looking at buying homes in the outlying areas where homes typically are cheaper, Prandini said. Right now, home prices in Fresno and Clovis aren’t very different from the small cities, he said.

Prandini expects Sanger’s new home market to pick up faster than other cities because it is close to Fresno and Clovis near Highway 180.

The city already has issued six building permits this year and 15 last year after issuing only three permits in 2011. In 2005, the city issued 597 permits.

Sacramento-based developer Evergreen Communities pulled 13 of the 15 permits last year when the city offered an incentive that cuts development fees for builders that take over an abandoned project.

When the housing market imploded, the city was left with 10 abandoned subdivisions, most in the northwest area of the city, and 10 others that were approved but never started, said Dan Spears, the city’s community and economic development manager.

Evergreen is building in the 187-lot Royal Woods subdivision at Church and Reagan avenues. At least three other builders are actively building in the city, Spears said.

“There are a handful of others in the wings and we expect they will be coming online soon,” Spears said. “Things are looking up.”

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Home building nearly stops in small cities

Single-family home construction nearly stopped during the housing bust in many of Fresno County’s small cities. Here is how the numbers stacked up from boom to bust.

 

Source:Cities, Construction Monitor

By BoNhia Lee