|
Fresno Housing Market - 2008?
Larry Hawkins, Investment Broker
An excess of available properties has created a terrific Buyers market This is your
opportunity to buy the home of your dreams.
For Investors - see Single Family Homes as Income Properties and Estimated Cash Flow - Single Family Homes.
All sources predict that the Fresno area is going to double in population by 2040. This means about 30,000 new residents per year.
According to the Brookings Institute the Fresno - Madera markets will need 158,000 new housing units by 2030. The population of Fresno County is projected to be 1,658,280 by 2050, up 106% - twice the rate of growth as the rest of the state.
According to the California Association of Realtors, the median price of existing homes in Fresno in 1990 was $100,000 and the median price of a home in California was $230,000. By 2005 the median price for Fresno had soared to $260,340 (with a 28% affordability index) and for the state $485,700. Thus, even with the tremendous price increase in Fresno, the gap between Fresno and the rest of the state eontinues to be huge.
Fresno remains the least expensive market for single family homes in California, with the exception of the high desert area.
Prices have been declining for the past year. The current market price for houses is at the lowest level possible for builders to produce new housing, while costs of construction materials are rising. Thus I believe we will see an increase in home prices as soon as we work through the foreclosure mess that we are in. How long? Good question! My best guess is two years.
The Fresno residential investment market is a state-wide driven market, not just a local market. In 2006, 20% of newly built homes were purchased by people relocating from higher priced areas to Fresno.
This is a very interesting figure provided by the Office of Federal Housing Enterprise Oversight: they stated the average priced home nationwide is $223,400, the same report showed the average priced home in Fresno at the same time was $225,500. So investors, we are only at the national average. I will point out that the rest of the nation does not project population increases anywhere near that of Fresno.
I see the following:
1) Increased demand for housing from exploding population through 2040.
2) Increasing cost ofnew home construction due to fallout from oil costs and environmentally driven legislation.
3) Fresno Prices are currently at the national average.
4) Fresno prices are 47% of the statewide median home price.
5) Fresno is a statewide market.
6) Interest rates continue to remain low with FHA loans picking up where the conventional lenders are unable to perform.
My conclusion is based on simple population growth. This will consume the current oversupply of housing on market and create a need for housing that can only be built at an increased cost do to the increase in building costs. The increased FHA limits will provide the financing needed to fuel this market. Prices on houses will hit bottom and begin to rise within 12 months.
|
