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Fresno Housing Market
Third Quarter, 2010
Larry Hawkins, Investment Broker
This is your opportunity to buy the home of your dreams - but it is becoming increasingly difficult.
The drastic drop in home prices combined with low interest rates and home buyer tax incentives have generated a huge number of buyers. The inventory of homes for sale in Fresno/Clovis has dropped from a high of 20 months supply in Sept of 2007 to a 2 month supply today.
We now see multiple offers on homes that are well priced and in decent condition. About 60% of the homes sold are bank owned and 30% are short sales. Prices are beginning to rise as a result of the lack of supply. In the past 12 months the median price of housing has increased 14%, from $140,000 up to $160,000. I do not believe that this rate of price increase will continue but I do believe that it signifies a bottoming of the market.
The current prices are also attracting a large number of investors into the Fresno housing market. This also pushes demand.
No one can predict how the fiscal crises of the State of California will eventually impact the future of the housing market in the long run. The anti business legislative agenda will most likely continue until the fools in Sacramento are replaced. That may not happen in my life time.
Future prices will depend of the number of foreclosures and interest rates, and employment. If the number of foreclosures falls, interest rates remain stable - and the employment situation improves we will see a rise in home prices. If we see an increase in the number of foreclosures, a rise in interest rates and more un-employment, this may cause prices to decline.
Financing: My best source for direct funding loans has been Wells Fargo – Mayra Ruiz 559 437-1177. Or talk to Molly Meeker 559 490-2701, Steve Heintz at 559 432-2727 or Sue Sweda 559 225-0500.
Fresno Area Rents Analysis
Third Quarter, 2010
By Larry Hawkins, Investment Broker
The single-family rental market has seen an increase in number of homes for rent. This is because many would be sellers are unable to sell their homes in the current market and instead of selling are forced to convert the property into a rental. Also investors are buying the bank owned homes in record numbers and creating more rentals. This increase in available rental homes has kept rent incomes for houses at a flat rate for the past two years and those rental rates will continue flat for the next 24 months or so. Vacancy remains low due to foreclosures forcing previous home owners into becoming tenants that prefer to live in single family dwellings and the lower rents attracting apartment tenants to make the move to rental homes.
The apartment market is a different story. Apartment vacancies have increased in the Fresno market. I believe there are two main causes; people leaving the area due to unemployment (which is estimated at above 15%), and families doubling up as a result of less income.
Due to the cost of construction, newer units average $1000+ per month. These units are larger and come with a list of amenities but because of the much higher rent are in a different market than the older units. I have seen vacancies of 27% and higher in the $900 per month and up market.
Most multi-family buildings in the Fresno market were built in the 1960-1970 era and rent on those units average $650 per month for a typical no frills two bedroom one bath.
So we have a limited supply of older units available at the lower rents. This keeps vacancy low and puts pressure on those lower end units for rent increases. Fresno has one of the highest concentrated poverty rates among the larger cities in the nation. This adds even more demand in this low-end limited supply market.
The newer units with higher rents have a much higher vacancy rate and the older lower rent buildings have approximately 94% occupancy. This results in an out of Balance situation that I believe will be of tremendous benefit to investors as those market forces work to increase rents in the lower rent buildings. I believe rent increases in these lower end units will be in the 3%+ range for years to come. Do the math on this and Fresno units look better and better.
Residential Income Properties
Fresno/Clovis
Third Quarter, 2010
By Larry Hawkins, Investment Broker
Single Family Homes: At this time I am recommending single family homes as income properties. 2008 saw a glut of inventory and prices were headed downward. Today we have a shortage of properties. During the past 12 months we have experienced a 14% increase in the median price of homes. Those homeowners displaced by foreclosure are looking for homes to rent and we have a low vacancy in homes at this time.
Two to four units are becoming more affordable as the market works through a price adjustment and there are some very good buying opportunities. The older, lower priced rental units are most competitive in this market. The higher end units are suffering a very high vacancy rate – 30% or more.
5 or more units are the best value at this time. The financing is more difficult but is available to the strong buyers. Again, it is best to focus on the lower priced rental units, the large higher end luxury units are experiencing high vacancy rates.
For information on houses see Single Family Homes as Income Properties.
Here you'll find analytical commentary with referenced News Articles. In addition you can view work sheets pertaining to Estimated Cash Flow.
For information on apartments see our Multi Family Income Properties page.
Under this category you will find analytical commentary, as well as work sheets for the Estimated Cash Flow of a 4plex, Estimated Cash Flow of an 8plex, and Estimated Cash Flow for 26 units including discussion of how projected rent income changes can dramatically increase cash flow and, as a result, increase the overall value of the property.
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