Homes in the Fresno-Clovis-Madera area continue to increase in price, whether new or old. But experts are concerned that market changes could be on the horizon.

It is not for lack of demand, but regulations.

Permits for new homes in the Fresno-Clovis-Madera region are outpacing last year. But, building industry leaders are concerned about whether those numbers can continue through 2022.

What is worrying them is how to implement a new system to mitigate the effects of home building on traffic and the environment known as Vehicles Miles Traveled.

“If mortgage rates stay low and lumber prices come down, the prospect for construction activity for 2022 is positive,” said Mike Prandini, president and CEO of the Building Industry Association of Fresno/Madera Counties.

“However, the future beyond that doesn’t look too bright as home builders try to figure out how to deal with Vehicle Miles Traveled,” Prandini said.

Cities See Continued Demand

Permits for new home construction were down year-over-year between 2019 and 2020 for Fresno, Clovis and southeast Madera County. Based on the first five months of 2021, things were steadily picking up.

BIA projected that the number of permits issued and the number of units sold for 2021 will be higher than in 2020.  Madera County is expected to have more than 600 permits issued, many in the fast growing area along Highway 41. Meanwhile, Clovis and Fresno combined are projected to have more than 2,300 permits issued and over 1,900 homes sold.

“We’re absolutely seeing a demand. Fresno a prime place to be. We are hearing a lot of optimism from the building industry and we’re just here to help support them, get units in the ground,” city of Fresno planning director Jennifer Clark said.

Clark expects permits pulled this year to be the highest since the 2008 recession.

“We would anticipate somewhere in the neighborhood of of over 2,000 units for calendar year 2021,” Clark said.

She is anticipating continued demand for 2022.

“We’re still seeing really, really strong demand,” Clark said. “Based on my discussions with the residential industry, both on the multi-family and the single family side, they feel very optimistic about the next calendar year. I would lean on them to tell me where they think the market is going. But certainly, we continue to see strong demand for issuing building permits.”

Clark sees a balance between new development in “infill” areas — those vacant lots in the interior of the city — and new growth areas.

“There is a lot of strong demand for new growth areas, in particular west of Highway 99 and the Southeast Development Area. So there’s there’s a lot of demand in both both of those areas for larger new subdivisions,” Clark said.

Building Industry Expects Slowdown

But, Prandini does not expect that to last.

“Almost all builders are working on maps that were approved before July 1, 2020.  For Fresno and Madera counties, once those lots have been built out, there are not many lots being processed to replace them,” Prandini said.

How to deal with a change in mitigation measures worries builders.

“There have been no new projects submitted for more than 50 units (the threshold at which VMT applies), or about 10 acres, since July 1, 2020 and it is not expected that any such projects will be submitted before mid-2022.  Based on current information, it is likely that new homes built in new tracts approved in 2022 will be much more expensive.  This will cause a reduction in demand that in turn reduces the supply of new homes thereby exacerbating an already short supply,” Prandini said.

Both Fresno and Clovis are developing their VMT mitigation programs. Clovis councilmembers will discussing their proposed measures at their meeting Monday night.

Clark expects the city of Fresno’s VMT plan to be presented to city council members in the fall.

“I don’t know that we have enough information to say exactly how it could or will impact sales in the future. I do know that city of Fresno has a very robust public transit system which assists in reducing those VMT in most areas of the city,” Clark said. Mixed use projects will also help reduce VMT.

Real Estate: Fewer Homes, Higher Prices

Even if new home building slows down, the inventory of existing homes for sale could increase in the next year, according to the Fresno Association of Realtors.

“Yes, the market is very hot. We are way up from 2019 and 2020,” FAR president Annie Foreman said.

For the 12-month period ending in June 2021, the number of homes for sale is down 29%, but sales are up 3.8%. The median home sale in Fresno County in June was $363,000, up 19% from a year prior.

“That’s pretty dramatic,” Foreman said.

And sales continue, up in the last month 17%.

“There is suggestions that interest rates are creeping up and they’re going to continue to creep up. And the buyers have fatigue from the whole last year between the pandemic and the competition of writing several offers,” Foreman said.

Foreman said the pandemic had a large role to play in the hot market, depressing inventory. Sellers were concerned about selling during COVID and having people inside their homes.

“A few months into the shutdown, the buyer pool increased because so many people said, oh, wait, I don’t just sleep at my home anymore. I work here. It’s my playground. I teach school here. I need a bigger place,” Foreman said.

Demand increased, especially from buyers from Southern California and the Bay Area.

“If you look at being able to work remote, would you rather work remote in 700 square-foot studio or for less money you get a 2,500 square-foot home with a backyard in the Central Valley.  That buyer pool just dramatically increased because of the pandemic, people coming from out of the area and our own residents who are wanting more space,” Foreman said.

Foreman sees more homes coming online and more buyers priced out of the market.

“I’m not really predicting a decrease in prices. I’m seeing more of a leveling out. Increasing 19% (in sale value) in one year is really dramatic. That’s not something that we are used to.  I don’t see that sustaining long term,” Foreman said.

Given the difficulties new home builders are facing, Foreman says buying an existing home is a better option.

“The cost to build a home right now is more than ever.  Because of the pandemic, cost of supplies are through the roof. The labor pool is way decreased.  And then the regulations in California are so crazy.  Home builders do to make a profit, they’re going to have to increase the prices,” Foreman said.

Foreman says all areas of Fresno and Clovis are hot right now, but buyers  prefer homes in the Clovis Unified School District.