Merced area home permits increasing

After a stretch of little growth, the housing market in Merced County has begun to show new signs of life, with cities beginning to issue more housing construction permits and home sale prices rising faster than the state and national averages.

The average cost for a home rose by 11.1 percent in January compared to the same time last year, according to numbers released Tuesday by Corelogic Inc. The rate outpaced the state average of 8.1 percent and the national average of 6.9 percent. Merced County’s increase nearly matched the 11.6 percent year-over-year rise for homes in the Bay Area.

Cities across the county are seeing greater interest from developers looking to add homes to the relatively tight market.

The impact of the Bay Area’s infamously tight housing market is once again spilling over to Los Banos, where the city’s Planning Commission issued 73 permits for new home construction in the first two months of this year. That compares to the 127 permits taken out in all of 2015.

“(Homes) are not being built and sitting there,” Senior Planner Stacy Souza Elms said. “They’re being sold, as well.”

About two-thirds of the Los Banos homes are being sold to people looking to commute to Bay Area jobs, she said. Growth in the population could help boost the city’s business economy as more retailers mull opening up stores in Los Banos.

While Bay Area commuters have limited effect on the east side of Merced County, the market remains in good shape, said Andy Krotik, a real estate agent with Coldwell Banker Gonella Realty in Atwater.

“We’re seeing good activity,” he said. “I’m not concerned about the market. It’s a good, healthy market.”

Houses that fall under $271,000 are seeing the most activity, he said, because those qualify for Federal Housing Administration loans for first-time home buyers.

The biggest barrier to buying a home is the down payment, Krotik said, so the loans open those houses up to a larger pool of buyers. Of the 70 homes on the market in Atwater, 23 fell into the loan’s sweet spot.

In Atwater, the first two months of the year have not produced any permits for new homes. Scott McBride, Atwater community development director, said he expects building to pick up later in the year.

Last year, Atwater issued 95 new home permits, after going all of 2014 without a single one.

Merced issued four new home permits in the first two months of 2016, and 17 others are in the approval process, said Kim Espinosa, Merced’s planning manager. The city expects housing starts this year to easily outpace the 83 permits it issued in 2015.

The city’s Planning Commission this month will consider an application for a new subdivision, which would be the first in several years, Espinosa said.

“I think we’re probably looking at at least 100 to 150 (new homes) this year,” Espinosa said.

This story was originally published March 1, 2016 at 6:02 PM with the headline "Merced area home permits increasing."