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When University of California, Merced, opened its doors in September, 875 undergraduate and graduate students began classes. School officials expect that number to grow at a rate of 800 to 1,000 students per year and project that by 2010, some 5,000 students are expected to call Merced home.
More students will mean more staff and lots of businesses opening to cater to them, which translates to greater housing needs in the area. Local and national builders, along with developers, have taken note. With a shortage of available land in Modesto and its surrounding areas, more and more of them are eyeing the Merced area as the next big thing.
Over the past few years, Merced has seen the number of builders and developers jump from a modest five to a whopping 26, according to Guy Maxwell, president of Merced-based Maxwell Homes and president of the Merced chapter of the Building Industry Association of Central California. "There has been a ton of new building and development in town, and we've had a tremendous influx of homebuyers," he says.
One downside to all of the new construction is that - as is the case in much of the state - the housing market has started to cool. "A year ago, you could sell a house in 15 minutes. Now, it might sit for four months," says Maxwell, whose company builds tract homes for first-time buyers as well as rental apartment communities.
Another impact of all of the development is that the price of raw land is skyrocketing. A parcel of land that would have cost Maxwell $25,000 an acre to purchase seven years ago is now going for $500,000 an acre, he says - and he's still considering buying it. "No one saw that coming," Maxwell says. The group benefiting the most, according to Maxwell, is farmers, who are realizing huge profits on what used to be acres and acres of farmland.
Whether it was the housing moratorium passed in Tracy as part of Measure A in 2000 or the current land shortage in the Modesto area, the Merced area inevitably feels the impact, Maxwell adds. "Whenever there is a situation in the bigger areas that hampers growth, the people involved do tend to move in this direction because of all of the land down here," he says.
Also driving Merced's building boom is a proposed racetrack and events center, Maxwell notes. Riverside Motorsports Park is being considered on the site of the decommissioned Castle Airforce Base in Atwater. Some 50,000 people are expected for event days, according to company officials. "In a community of 70,000, that would be a pretty big impact," Maxwell says.
Not all of Merced's new homebuyers are planning on living in the homes they are purchasing. Some buyers are leaving them empty while others are renting them out, according to Maxwell. A lot of them are looking at the homes as long-term investments and are banking on the racetrack receiving approval and the university's expected growth in the coming years. "That steady, consistent growth is attractive to investors and buyers," Maxwell says.
Already the school employs some 750 people, approximately 700 of them on the Merced campus, according to Patti Istas, communications director for U.C. Merced. In terms of spending, U.C. Merced has already spent more than $40 million in Merced County, according to Vice Chancellor John Garamendi.
The university isn't just bringing in students and staff, Istas notes. Retirees are also flocking to Merced. "They're attracted to being near the university and what it has to offer," she says. Bay Area retirees often can buy homes at much lower prices and pay for them outright thanks to prices that are sometimes half of what they are used to seeing.
Dunmore Homes has already built four planned communities in the area: two in Merced, one in Atwater, and another in Livingston, with a second under construction there. Prices start in the mid $300,000s with one exclusive community, Merced-based Silver Creek, starting in the mid $500,000s for a four-bedroom home. The Granite Bay-based company doesn't have any communities planned north of Livingston. Instead, work has already begun on homes farther south in developments in Fresno and Dinuba.
Michigan-based Crosswinds National decided to build master-planned Bellevue Ranch in Merced four years ago. "The university was the driving force in that decision," says Cathy Doig, the company's marketing director. Homes by four builders at Bellevue Ranch start in the low $300,000s and go as high as the mid $500,000s, depending on model, location and size. In August, the first phase opened with more than 500 "under construction" homes for sale.
"We've had fantastic sales," says Doig, adding that about 40 percent of the first phase has already sold. New homeowners, including a number of university staff and faculty, will start moving in this March. When completed in four or five years, Bellevue Ranch will have a total of nearly 3,000 homes. Also planned for the development are three parks, creek-side trails and a commercial center.
Currently, Crosswinds National isn't under contract on any other valley land, but that doesn't mean that there aren't plans for more developments and homes. "We are certainly evaluating the Central Valley area," says Doig. "We are looking for more land in the Merced area."