With short supply and ample demand, housing prices are on the rise in Merced County.
While that can be frustrating for those hoping to buy, it's good news for homeowners, local economies anticipating new home construction and government entities in need of more property taxes.
Last year, the median price paid for a house in the city of Merced was $119,000 -- an 8 percent increase over 2011, according to DataQuick.
The real estate market appears to be at the beginning of a "rapid price appreciation," said Jeff Michael, director of the business Forecasting Center at University of the Pacific.
"Values in 2012 are certainly a lot closer to normal than values in 2005. However, I think the values in 2012 are extremely low. And I do believe we're seeing home prices pick up."
At its height in 2006, the medium home sale price in the city of Merced was $350,000, according to DataQuick. By 2009, that number had fallen to $110,000.
However, it's not clear just how high prices will climb.
"I think we're in a balanced market," said Scott Oliver, business and technology manager for Gonella Realty in Merced. "I think you're going to see the numbers go up in a standard manner, 3 percent per year maybe."
Throughout the 1990s, the median sale price of existing detached homes hovered around $100,000, according to data from the California Association of Realtors.
If more industry comes to town, over the next few years, Merced could see the median home sale price jump to about $140,000, he said.
Renting, not buying
Meanwhile, fewer homes have been coming on the market as the crisis runs its course and the government pressures banks to keep people in their homes. In the city of Merced, about 20 percent fewer houses were sold in 2012 compared with the previous year, according to DataQuick.
While that's driven home prices up, many prospective home buyers have been stuck renting.
Renee Pena and her family recently placed a bid on a home in Atwater for $15,000 over the asking price. However, after months of searching for a home, they got outbid at the last minute.
"I kind of feel we're being shoved out of the market," she said. "We've seen as many as three or four homes a week. As of now, we're still looking."
According to many in the real estate business, Pena's story is common.
With only about a month's supply of homes on the market, competition can be fierce, Oliver said. "We have such a shortage of inventory it isn't even funny."
In the run-up to the housing collapse, Pena and her family got into a hefty mortgage. Then her husband lost his job, and they ended up losing their home. Since then, the family has recovered and, like an increasing number of people, they're back in the market driving the demand that is outpacing supply.
However, Pena said they're not happy with what's available because a lot of homes need significant repairs, she said. "They're too expensive, and they have a lot of work to be done."
All over the valley, the quality of homes has suffered significantly -- especially houses left vacant because of foreclosure, Mi- chael said.
However, that's not stopping people from trying to buy.
"Right now when you list a piece of property at $100,000 to $200,000, you're going to get multiple offers many times over the asking piece," said Loren Gonella, owner of Gonella Realty.
Part of what's driving the market is demand from investors.
About 30 percent of all sales are paid in full, Gonella said. "If you get eight offers, two or three might be cash."
Oliver said he manages about five investors that buy property in Merced County on a regular basis.
"I have a buyer from the Bay Area, and his goal is to buy one a month," he said. "There's probably a pool of 20 to 25 percent of the buyers out there who are buying multiple rentals."
No matter what's driving demand, the desire for homeownership has developers looking at new home construction for the first time in years.
After three years with little to no building in the city, officials recently lowered the fees associated with new home constructions by more than 50 percent.
"You have builders going into the city of Merced and dusting off their plans," Gonella said. "You have demand, no supply and fees coming down, and a zillion lots. The stars are starting to align."
The city expects to see new home construction begin by this summer, said David Gonzalves, director of development services with the city of Merced.
"Those conversations are happening weekly," he said. "I've had many in my office determining when they're going to start building, not if, when, and that's a good sign for the city."
Reporter Joshua Emerson Smith can be reached at (209) 385-2486 or firstname.lastname@example.org.