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Some Spark of Life For Visalia Housing Market

Visalia has been the poster-child for the nationwide housing crunch, caught up in the speculative run-up in prices and expansive overbuilding by a flotilla of national and area builders that led to the bleak economic picture we have all seen, the banking and Wall Street collapse,our economies shrinking and the rest.

The nationwide economic downturn has been well on display in Visalia where the average house has lost more than half its value, a sea of foreclosures and resulted in the departure of most of the homebuilders from the market.

Last year was a decade-low year for homebuilding with the city permitting only 181 single family homes – down from the height of the building frenzy when Visalia permitted 1450 new homes in 2005.

That’s why this August home permits just tabulated by the city, look impressive. The city permitted 55 new single family homes in August bringing this years’ total so far to 181, the same number permitted for all of last year.

“We’ve seen several builders say business has picked up” says Greg Adams, Visalia’s chief building official.”It’s a steady pace and it is all around town.”

“We understand Pulte Homes is bringing in permits for about 20 more in September” adds Adams.

“I think the difference is that the homebuilders are no longer building on spec. These are pre-sold homes.”

Among the busiest builders is national builder Lennar Homes who is now number one in sales in the Central Valley.

While the inventory of existing homes continues to fall – the price of homes has been going up across the nation – up 3.8% in July CoreLogic reported this week.

“It’s been six years since the housing market last experienced the gains that we saw in July, with indications the summer will finish up on a strong note,” said Anand Nallathambi, president and CEO of CoreLogic. “Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.”

Record low mortgage rates are not hurting either and a recent rate rise may have people finally getting off the fence. Lennar says there are other factors. Pent up demand from crowded households are leading to new customers. In their second quarter 2012 report Lennar says their backlog of 3,970 homes is up 61% from Q2 2011 and their revenues of $930.2 million is up 22% from Q2 2011.

Florida-based Lennar’s stock value has improved this year rising by a third since earlier this year.

Lennar has three subdivisions in Visalia with prices starting as low as $189,000. The average new home inVisalia is being permitted at around $200,000. Attractive mortgage rates right now show paying a $180,000 mortgage for 30 years is around $860 per month, about the same as renting.

Helping the new home market has been a decline in existing home inventory seen across the state. A recent Redfin survey found homeowners holding off putting their houses up for sale figuring it will fetch more later. Instead, they are renting out their house. “We believe the main problem is not, as conventional wisdom would have it, that people can’t sell because they’re underwater on their mortgage. The problem with sales volume is that most homeowners just don’t want to sell.” says Redfin CEO  Glenn Kelman.

For buyers facing fewer used home choices on the market – why not go for new home?

Local home builder Gary Smee agrees that demand has improved. “Our traffic has picked up” says Smee who has subdivisions in Porterville and Goshen. “With the low inventory out there people are willing to pay more but the appraisals are behind.That’s what is holding things up.”

Smee says he believes it will take some time for the appraisals to  reach what buyers are willing to pay for.

Smee says in Porterville he is only builder left doing new homes in any number with Woodard Homes gone and Ennis doing only a few after their bankruptcy.

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