Central Valley

'Plague' of foreclosures means little demand for building in San Joaquin Valley

Fewer Northern San Joaquin Valley homes are under construction than at any time during the past 20 years, Construction Industry Research Board statistics show.

Only 218 new home building permits were issued from January through April in Stanislaus County. Compare that with the 1,727 permits issued during those months in 2005, which was the peak of the region's building boom. Permits have plunged 87 percent since then.

Last year was Stanislaus' slowest home-building year since at least the mid-'80s. But 2008 is much worse: Fewer than half as many homes are under construction as were being built last spring.

The situation is more dismal in San Joaquin and Merced counties, where building permits have declined even further.

"Those of us builders who are left are hunkered down. We're just trying to ride this thing out," said Steve C. Mothersell, president of Modesto's SCM Homes. His three Newman developments are almost at a standstill. The completed homes he has for sale are priced at less than construction cost.

Mothersell said builders must compete with "a plague of foreclosed homes" that are priced at less than $100 per square foot.

"We simply cannot compete with that, not even if we were given the land and the building permits for free," Mothersell said. "That's why nobody is building anything on speculation anymore. They're building pre-sold homes only."

The valley's new home market isn't expected to pick up anytime soon.

"It's going to be this way for months and months," predicted Robert Martelli, vice president of JKB Homes, which has subdivisions in Turlock, Riverbank, Oakdale, Hughson and Denair. "We've got supply and demand issues. Why build homes and sell them at a loss?"

Martelli said the building slowdown is creating financial hardship throughout the region. "We are a construction-driven econ-omy, and a lot of people have been put out of work."

According to Martelli, Stanislaus' official unemployment rate of 10.7 percent is lower than the actual unemployment rate because it doesn't count the many undocumented workers who had been employed in construction trades.

"Just two years ago, a study determined that home building was a $58 billion a year industry in California, employing more than a half-million people. Today, with production off by nearly two-thirds (statewide) ... the economic impacts of the downturn are rippling throughout the economy," said Robert Rivinius, president of the California Building Industry Association.

Only 11,685 single-family-home permits were issued in California from January through April, compared with 50,120 during the same months in 2005.

54-year statewide low predicted

The Construction Industry Research Board predicts that California home building this year will be at its lowest level since 1954, which is as far back as its records go. County-by-county statistics were made available only to 1988.

The downturn, however, has created buying opportunities for home shoppers.

As an example, new home prices at SCM's Park Villas at Sherman Ranch in Newman start at $165,000. That's $60,000 less than they were going for last spring when the subdivision opened.

"The biggest price adjustments happen in the most remote, rural markets," said Mothersell, explaining why Newman prices have dropped so low. To sell houses, SCM offers down payment assistance.

JKB Homes has sweetened its new home deals by making electricity-generating solar- power roofs standard.

"This is a great time to buy," Martelli said. "People are getting some really good deals."