MERCED — You may still be able to find a deal on a home.

But prospective buyers in Merced face steep competition as the number of single-family residences for sale continues to drop, according to industry data.

"It's crazy here," said Liz Wunder, an Atwater renter who has been house hunting for almost a year. "A house will come on the market, you can offer more than full price, and there will be 12 other offers on the place."

As of June, there were only enough homes for sale in the Merced-Atwater metropolitan area to last for fewer than 1½ months given current demand, according to data from the Merced County Association of Realtors.

Two years ago, there was about four months of inventory on the market. In 2007, there were enough houses on the market at any one one time to supply demand for 1½ years.

"In my 23 years in business, I've never seen an inventory so low," said Andy Krotik, manager of Coldwell Banker Gonella Realty in Atwater.

It's unclear what's driving the squeeze on available homes, but several factors likely have contributed, including a slowing of the number of homes in foreclosure.

As of April, less than 9 percent of home loans in Merced County were more than 90 days delinquent, according to CoreLogic.com. That's historically a high number, but it's a significant decrease from two years ago, when the rate was 18 percent.

Also, many people might be reluctant to sell their homes with prices that, compared with the height of the boom, remain at less than what owners believe the homes are worth and are a bargain for buyers who can close the deal.

Wunder and her husband recently found a place in the upscale McSwain area of Atwater priced about $350,000, down from about $700,000 at one point. The family was so pleased with the home, they offered several thousand over the asking price.

However, a cash buyer outbid them at the last minute, Wunder said. "It's so weird. Where are all these people coming from?"

Increases in home values in the Bay Area and as far east as Tracy and Manteca have affected the market in Merced, said Ray Franco, longtime local developer.

"The prices are getting strong in those regions, and that has a domino effect in our region as people drive a little further to get a better price," Franco said.

That trend has increased competition for home buyers, and it's helped homeowners see slight improvement in the value of their properties.

In the wider Merced metropolitan area, the median home price has edged up to about $132,000 in June, up from $110,000 two years ago, association of Realtors data show.

How good that news is isn't entirely clear.

"Recovery's in the eye of the beholder," said Shawn Kantor, UC Merced professor of economics. "The last couple years, (home prices) have sort of flat-lined, and lately it's sort of trickling upward because of the limited supply."

However, increases in home prices likely will trigger home construction, Kantor said.

"For a really long time, you're probably going to have prices capped at construction costs," he said. "Whenever you have prices pop up above construction costs, you're going to have new building that will pull prices back down."

And the city of Merced is poised to build, with about 2,000 vacant lots approved and ready for residential construction, according to city planning officials.

Single-family home construction essentially has ground to a halt in recent years, but there's evidence it could be picking up.

Franco, who builds higher-end homes in an Atwater subdivision called Heirloom Collection, has about 12 projects going. That's not as many as the 20 a year he was building before the housing market collapse, but it's significantly more than the four a year he was constructing two years ago.

At the same time, those homes are selling for less than half of what they did at the peak of the market, he said.

"It's been coming back fairly good," Franco said. "Most of the buyers are pleased that our prices are lower. I'm basically selling them at cost."

Reporter Joshua Emerson Smith can be reached at (209) 385-2486 or jsmith@mercedsunstar.com.

BY THE NUMBERS

Changes in single-family home values in the city of Merced, according to the Federal Housing Finance Agency:

In the first half of 2012, housing prices increased 2.17 percent over the same period the previous year.

In 2011, housing prices decreased 4.9 percent over the previous year.

In 2010, housing prices decreased 2.9 percent over the previous year.

In 2009, housing prices decreased 23.9 percent over the previous year.

In 2008, housing prices decreased 38.3 percent over the previous year.