Future of housing market debated Local real estate insiders scoff at predicted 'nose dive'

Bakersfield's housing market is still healthy and is simply going through a market correction that was inevitable after its meteoric rise, according to several local real estate professionals.
"I don't think it's all doom and gloom," said Jon Busby, a real estate agent with Bakersfield Premier Realty. "We had the investors that came and the builders that came and drove the prices up. It's just correcting itself now."
In December there were 3,181 homes listed on the market, down 13 percent from the month before, according to a preliminary report on December sales compiled by local appraiser Gary Crabtree. The full report is due out next week.
The preliminary report also shows the median list price of existing homes declined from $289,000 in November to $288,000 in December.
"Listings are going down," Crabtree said. "Sellers have come to the realization that the party is over and they can no longer get the prices they were expecting before. We've reached a plateau and that plateau is holding. It is not taking this gigantic nose dive everyone was predicting."
After being one of the nation's hottest real estate markets in recent years, some have described local market conditions as a bubble and predicted Bakersfield's real estate market will be one of the nation's worst in 2007.
But local real estate experts disagree.
"They are crazy. We don't have one of the worst housing markets in the country," said Ray Karpe, the president of Karpe Real Estate Center and the incoming president of the Bakersfield Association of Realtors. "The market is not bad at all. The market has just slowed. It has gone from a ridiculously good market to a good market. We couldn't maintain that forever."
The real estate slowdown has led homebuilders to scale back their building pace locally.
In November, 120 building permits were pulled for single family residences in the city of Bakersfield, down from 225 a year earlier and 650 in August 2005.
Crabtree projects that home prices will decline by about 5 percent in 2007, but he says more dire national projections are off base.
"They don't see the whole picture," Crabtree said. "They're not here. They don't have their feet on the ground. They don't know what's going on."
Leslie Appleton-Young, the chief economist with the California Association of Realtors, anticipates a 7 percent drop in the statewide median sales price in 2007. She said areas like Bakersfield that had a wave of new construction during the housing boom, adding more supply, will experience greater price decreases.
But she said while the housing market is softening, she doesn't believe it is a bubble.
She said she doesn't foresee a real estate crash like the one in the mid-1990s unless the economy slips into recession, causing mass job losses.
"It's all relative. The housing market in general has been accused of being a bubble," Appleton-Young said. "There has been talk of a bubble for four years. In the last year and a half we have seen a significant decline in sales. But the actual decline in prices has been slower. What is protecting the market is we have an improving economy."
But increased foreclosures and a rise in interest rates could spell trouble for the housing market, Appleton-Young said.
Crabtree said last year he routinely saw between 20 and 30 notices of default filed a month. The numbers jumped to 41 in November 2005 and 179 in November 2006.
Local appraiser Jeremy Jans anticipates the local market will actually pick up a little this spring, despite a possible increase in home listings some are predicting.
"Although we will not get back to where it was, it will be a strong market this year," Jans said. "We are a unique market. We always react a lot slower than everyone else. We are a lot more affordable than other places."
Bakersfield's relatively affordable housing market compared to the rest of the state has prevented a more dramatic market correction, according to Delores Conway, the director of the Casden Forecast at USC's Lusk Center for Real Estate.
"It's slowing like all places are slowing because the speculators are pretty much gone," Conway said. "Bakersfield has been fairly strong, partly because of lower prices and the shift in population into central California.
"In Southern California we are pretty much land constrained. Bakersfield can still build. As long as the builders don't get crazy, there still is demand. It's just that the housing market is returning to more of a normal level."