Merced Developers Learn to Be Careful What You Wish For

For years, UC promised – but didn’t actually – to build a Central Valley campus. In many respects, the promise without the delivery was the best of worlds for UC when it came to the legislature.

Real estate developers throughout the Central Valley, and their legislative representatives, had dreams of a new campus sparking a development boom. After all, it worked when UCLA moved to Westwood. Decades later, it worked for Irvine. Why not in my area (or legislative district)?, they thought. UC could study various locations but be noncommittal about the final decision. That way, multiple hopeful legislative members could be UC supporters. Indeed, all political leaders in the Central Valley saw the prospect of a UC-induced boom in their locale.

But eventually, once the location decision was made – putting it in Merced – only one state assembly member and one state senator cared.

UC-Merced still promotes its potential impact on local development. See the video clip below. But the news item below, which appears to be a NY Times and Sacramento Bee joint report, indicates that Merced is a major center of foreclosures. The beneficiaries, the report indicates, are students who get to live in “under water” McMansions built on spec by developers for the boom that wasn’t. Excerpt:

MERCED – Heather Alarab, a junior at the University of California, Merced, and Jill Foster, a freshman, know that their sudden popularity has little to do with their sparkling personalities, intelligence or athletic prowess. “Hey, what are you doing?” throngs of friends perpetually text. “Hot tub today?”

While students at other colleges cram into shoebox-size dorm rooms, Alarab, a management major, and Foster, who is studying applied math, come home from midterms to chill out under the stars in a curvaceous swimming pool and an adjoining hot tub behind the rapidly depreciating “McMansion” they rent for a song. In Merced, one of the country’s hardest-hit areas for home foreclosures, the downturn in the real estate market has presented an unusual housing opportunity for thousands of college students. Facing a shortage of dorm space, they are moving into hundreds of luxurious homes in overbuilt planned communities…

A confluence of factors led to the unlikely presence of students in subdivisions, where the collegiate promise of sleeping in on a Saturday morning may be rudely interrupted by neighborhood children selling Girl Scout cookies door to door. This city of 79,000 is ranked third nationally in metropolitan-area home foreclosures, behind Las Vegas and Vallejo, said Daren Blomquist, a spokesman for RealtyTrac, a company based in Irvine that tracks housing sales. The speculative fever that gripped the region and drew waves of outside investors to this predominantly agricultural area was fueled in part by the promise of the university itself, which opened in 2005 as the first new University of California campus in 40 years.

The crash crashed harder here. “Builders were coming into the area by the bulkload,” said Loren M. Gonella, who owns a real estate company in Merced. “It was, ‘Holy moly, let’s get on this gravy train.’ “…

With hundreds of homes standing empty, many of them likely foreclosures, students willing to share houses have been “a blessing,” said Ellie Wooten, a former mayor of Merced and a real estate broker. Five students paying $200 a month each trump families who cannot afford more than $800 a month…

The university’s free transit system, Cat Tracks, stops at student-heavy subdivisions. There are also limitless creative possibilities, with decor ranging from a Kappa Kappa Gamma sorority bedroom motif to an archetypal male nightstand overflowing with empty bags of Flamin’ Hot Cheetos.

Not all neighbors are amused. “Everybody on this street is underwater and can’t see any relief,” said John Angus, an out-of-work English teacher who paid $532,000 for a house that is now worth $221,000. “This was supposed to be an edge-of-town, Desperate Housewife-y community,” he said. “These students are the reverse.”…

Full story at http://www.sacbee.com/2011/11/13/4050655/uc-merced-students-fill-mcmansions.html

Developers and under water homeowners are not the only ones paying the cost – and in a period when UC budget dollars are scarce. Perhaps some lessons might be learned from this episode, systemwide and locally.