Getting Bigger & More Expensive

Getting bigger & more expensive
Housing starts strengthen for second straight month

Dennis Wyatt
Managing Editor, Manteca BulletinIt might not be enough to declare a trend or even a turnaround, but new housing starts in Manteca for the second straight month were up a dismal spring along with the size and cost.There were 37 single-family home permits issued by the city with an average construction value of $170,513. The new homes also represent the biggest in terms of average square footage in 10 months. The average home was 2,728 square feet.

Manteca new homebuilders started 38 new houses in June.

That was almost double the best month previously this year, which was 20 in May. It is still a far cry from previous Junes when as many as 70 new homes were started.

The average home in July also is costing $170,513 to build. That is before land, site development costs, infrastructure such as sewer and water lines, permit fees and developer profit are factored into the equation.

The weakest July for new home starts in eight years contrasts with efforts by developers to move forward new projects that could add as many as 5,889 homes to Manteca.

If the current pace continues, single family home construction starts will reach 256 this year in Manteca. It will make it the slowest year since 1999 plus would make it almost 62 percent of last year’s 416 starts.

If starts reach 282, it would be equivalent to about a third of the sewer allocations allotted to new homes in Manteca under the 3.9 percent growth cap put in place in 1988. The growth cap allows 890 sewer allocations for 2008.

But perhaps more telling of what builders are dealing with in a bottom-line price-driven market is the size and cost of new homes.

The square footage for an average new home start in Manteca is 2,156 square feet. The smaller homes reflect a lower cost to build the actual house minus land costs, site costs, fees, and developer costs. It has dropped to $151,050 for an average new home down from $160,979 in 2007 when 416 homes were started and from $165,087 in 2006 when 516 homes were built.

The size and price of new home starts rebounded for the second straight month in July, up $33,897 and 968 square feet from May.

The new housing slump has prompted some to wonder why developers are moving forward with nine projects that need annexation to the City of Manteca that includes plans for 5,889 more homes.

That is in addition to already approved projects that are far from being built out including Tesoro and Valley Park in South Manteca as well as Del Webb at Woodbridge plus Union Ranch East in North Manteca. It also doesn’t include approved projects that haven’t broken ground yet including the 760 homes and 310 apartment units approved for the Villa Ticino West project on the southwest corner of Airport Way and Louise Avenue.

Manteca developers – local, regional and national – have all been through housing slumps before and understand it is a cyclical business. They also have cited other reasons to be confident about housing demand eventually coming back even stronger in the long run than before including Manteca’s position as being in the virtual center of the region the state expects to lead California’s growth for the next 20 years – the Northern San Joaquin Valley counties of San Joaquin, Stanislaus, and Merced.

They also look west of the Altamont Pass and see the economy picking up steam in the Bay Area in key sectors, which has historically served as a precursor to an eventual stampede of buyers heading east to find homes they can afford.

The lead time to actually get a major project to the point it can break ground in Manteca once a proposal is submitted to the city is anywhere from two to five years depending upon whether the land is already within the city limits, according to developers. That pretty much reflects reality in the rest of the state as the California Environmental Quality Act has significantly slowed down the process over the past two decades.

Banks that underwrite developers’ upfront costs such as site development that includes streets and such have been preparing to start funding more work this summer and fall.

That would mean the builders would be to the point to start building homes by June 2009.

Builders are readjusting to market realities.

Three new sets of home plans being processed by three different builders have all but wiped out traces of homes 3,400 square feet or larger.

Three developers – Woodside Homes and Standard Pacific in Tesoro northeast of Van Ryn Road and Woodside Avenue as well as Florsheim Homes on Woodward Avenue west of Airport Way – have a set of new master plans for new homes in their projects currently in review.