The local housing market is beginning to show clear indications of improvement after six years of stagnation, and home buyers, builders and bankers are breathing a little easier.
“It's an exciting time. I think we've got a good solid three to four years of strong market appreciation heading our way with the current shortage of housing inventory,” said Gary Grossman, president of Coastal Community Builders, Inc., a home
construction company that has developments across the Central Coast including Solvang, Orcutt and in San Luis Obispo County.
“There's going to be a little bit of a double-wave effect. First, with the current low-supply, housing starts are getting going, which brings job growth, which means more people able to buy homes.”
New Orcutt residents Cliff and Rowena Chapman are riding the front of that wave.
On April 19, after renting in Los Alamos for two years, the couple closed escrow on their Orcutt home.
“We feel that the interest rates are still low and, we've been watching the news, we feel the housing market is starting to turn. We think housing prices are going to march up,” said Cliff Chapman.
“The only thing that was frustrating about it was that we were very limited on what we could buy. We were looking for a home with RV parking. We had to have that. Of the 21 homes available, only four had RV parking,” Chapman said.
Statistics in the recently released UCSB Economic Forecast Project support the idea that economic growth is returning to the Central Coast, but it’s not going to happen overnight.
“I think things are coming back slowly, that's for sure,” said Peter Rupert, chairman of the economics department at UCSB and director of the Forecast Project.
Rupert explained that the U.S. and California are both seeing real, steady growth.
“It's not a big number, but we've seen real income growth, gross domestic product growth has been growing steadily,” Rupert said.
That marginal growth has hovered around 1.5 percent to 2 percent, Rupert said.
“If you look at Santa Barbara County, it's been relatively flat. While that seems bad for lots of reasons, Santa Barbara County seems to be less responsive to national cycles. We move in the same directions, but the volatility is not as big,” Rupert said.
Add to that growth a dip in foreclosures and the return of the banking industry to lending, and home buyers are on the road to breathing new life into long-stagnant projects.
In the Lompoc Valley, home values are on the rise and inventory is low, according to Lompoc Valley Association of Realtors President Bobbie Ranney.
In the Santa Maria Valley, buyers are beginning to bid up prices again, said Santa Maria Association of Realtors President Shea Hutchinson.
“It appears that trends are more positive than they have been in the past seven years,” said Santa Maria City Planner Bill Shipsey.
In Santa Maria, developments such as Ventana II and Terraces at Pacific Crest are getting rolling. Additionally, Centennial Square, a 138-unit apartment complex on 6.35 acres in downtown Santa Maria, and Hancock Terrace, a 262-unit apartment complex proposed for Boone Street, near the Santa Maria Transit Center are moving forward.
“Development is like a jet engine accelerating, it takes a long time to build up the turbines to get it up to speed,” Shipsey said. “Each project has to go through the planning process, get construction loans approved, line up materials, get crews, then finally start construction. That's where we are right now.”
Arleen T. Pelster, Solvang's planning and economic development director, said that city is “seeing an increase in development of both commercial and residential projects, some of which have been approved for years but are just beginning construction.”
The largest of those, 128-unit Skytt Mesa, is back in production on 14 units with 15 more in plan check and five in land use planning.
In Orcutt, Coastal Community Builders’ Mesa Verde project is back in production and Keysite 30 is back on the books for 69 single family homes on South Bradley Road south of Union Valley Parkway. A mixed-use village project that will reshape downtown Pismo Beach is also in the works, Grossman said.
Don Moore, a Pismo Beach building official, said that “On a whole I have recently changed my perspective from cautiously optimistic to optimistic.
“There is a lot of interest in Pismo Beach at the moment and it is great timing with the city revisiting the Downtown Specific Plan this summer. There are a lot of irons in the fire as such. It's anticipated we are looking at the potential to become very busy processing permits at levels not seen in quite some time,” Moore said in an email.
And in Guadalupe, city planners recently met with developers to discuss the tentative tract map for the 209-acre DJ Farms development which would include 802 homes, 48 mixed-used units, 250,000 square feet of commercial space, 12.5 acres dedicated to a school site and 15.9 acres of park space.
Downturn affected everything
According to the National Bureau of Economic Research (NBER), the longest recession since World War II began in December 2007 and turned sharply downward in 2008. As hedge funds with securities tied to the 2006 housing bubble evaporated, so did the liquidity of investors including banks and individuals worldwide.
The bureau defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”
NBER figures show that, while the Great Recession hit that trough in 2009, some sectors continued to drop for the next two years, and lagged behind in recovery.
In California, the gross domestic product produced by the construction industry dipped from $87.3 billion in 2006 to $62 billion in 2009, but continued to decline in 2010 to $57.4 billion, before rebounding in 2011 to $58.9 billion. Income in real estate sectors climbed through the recessionary period, then began dropping in 2010 and again in 2011.
The retail sector followed the national trend. State GDP dropped from $125 billion in 2006 to a low of $109 billion in 2009 before climbing to $116.7 billion and $121.4 billion in the following two years.
“As the housing construction market goes down, unemployment shoots up, and spending across the board goes down,” Grossman said. “There's a direct correlation. It's not just the accountants and planners and people in my office, it's all the architects, engineers, printing companies, sales companies, radio and newspaper advertising, sign companies, products, subcontractors, people who feed them, tools, office supplies, everything.”