CA modesto bee

Modesto Bee


Property values seem to be on everyone's mind. That was especially true Wednesday for the more than 500 people who attended the Valley Real Estate and Economics Conference in Modesto.

The hot topic was the depressed real estate market, and speakers offered conflicting views about how long it will last.

Some predictions were dire.

Stephen Endsley, the longtime real estate investor who organized the conference, gave the most gloomy forecast: Housing prices will continue to fall 5 percent to 10 percent per year for the next five years.

"It took us five years to get into this housing bubble, and it probably will take us five years to get out," said Endsley, a retired cardiologist.

That prediction was too harsh, according to Mike Zagaris, president of PMZ Real Estate in Modesto. Zagaris said the market may spend "another couple years drifting along" at current values, which makes this a good time to buy.

"You have to buck the psychology of the masses to take advantage of the real opportunity," Zagaris advised.

Those who study crowd psychology, he said, conclude that "the vast majority of people are buying when they should be selling and selling when they should be buying."

Few people are buying anything these days.

In Stanislaus County, only 3,700 homes are expected to sell in 2007, which is about half as many as sold in 2004 or 2005, according to Craig Lewis, pres-ident of Prudential California Realty.

Lewis said median home prices have fallen from $414,000 in 2005 to $359,000 now, and it takes nearly three months to sell the typical home.

"First-time home buyers have the ability to buy now, but … they're sitting back and waiting because they think the price will go down more," Lewis said. He doesn't agree. "I certainly feel we're at the bottom of the market."

So does James Brenda, president of JKB Homes, which has developments in Turlock, Denair, Hughson, Oakdale and Riverbank.

"A lot of price corrections already have taken place," Brenda said. He predicted home prices will be flat until next spring. "After that, it's going to be a long steady climb."

Fees drive prices higher

Among the things pushing up home prices are high government building fees, said Bill Zoslocki, a Modesto contractor and president of the Building Industry Association of Central California.

Example: Zoslocki said Patterson forces developers to pay more than $96,000 in fees per home, plus extra costs if it is built inside a community facilities district.

He said fees per home are $57,659 in Modesto and $53,741 in Oakdale, and both cities charge more for homes in community facilities districts.

"The fees are growing," Zoslocki complained. "If you want affordable housing to be built, this will have to change."

Besides dealing with a slowing market and increasing government demands, builders at the conference said they must cope with the region's shifting demographics.

Scott Salazar Myers, president of Renova Communities and Del Valle Homes, said about 70 percent of buyers are Latino at his southwest Modesto development, Rancho Encantado. Homes there start at $229,000 for 1,100 square feet.

Myers said Latinos are more than a niche market; soon they will be the majority. In the San Joaquin Valley, Myers said, Latinos make up about 40 percent of the population, but they are expected to expand to 51 percent by 2020 and 60 percent by 2040.

"Hispanics are largely a group of people who came here to work hard, but they come here with significantly less education," Myers warned. That means most don't earn as much as better-educated Americans, so they can't afford to buy expensive homes. "For those of you who bought a $500,000 house in Ceres … you have to be realistic about who your buyers are going to be (when you eventually sell)."

Hard to attract industries

The valley's demographics may be hurting the region's chances to lure new businesses and jobs.

Patrick Gavaghan, president of the corporation that developed Keystone Business Park in Patterson, said attracting industries to Stanislaus County "is a tough sell" because its residents aren't well-educated.

Gavaghan said his business park isn't able to attract many large employers — such as a Target distribution center that could have employed 450 full-time and 1,200 part-time workers — because the work force doesn't have enough formal education.

"Patterson and Stanislaus County have got to graduate more high school students," Gavaghan said. He expressed frustration because during the past two years he has not been able to convince any new big employers to move into his park.

Modesto's Beard Industrial District has a different problem recruiting businesses, according to Joe Mackil, its chief executive officer.

"We're turning away good companies with lots of jobs because we can't meet the water and sewer needs," Mackil said. He blamed Modesto politicians, who he said were unwilling for many years to raise water and sewer rates to finance new facilities. "Now we don't have the capacity."