Modesto resident Tanya Vega knows exactly which direction home prices are going in her city — up.
The Central Valley native and her husband purchased a new house earlier this year after watching home prices in the region for a while. This spring they decided to purchase a property in the new Cypress Grove development in Village One.
“We had hoped prices would go down, but when they didn’t we took the leap,” she said outside of her four-bedroom home.
Home prices have risen about 50 percent in Modesto in the last four years, but they still have not reached their peak of a dozen years ago before the real estate meltdown and the Great Recession.
The median sales price for an existing single-family home was $280,000 during January through May of this year, according to CoreLogic, which describes itself as maintaining “the largest, most comprehensive property and related financial databases in the United States.”
The median sales for an existing single-family home in Modesto was $184,000 for the same five months in 2014. The median is the midpoint, so half of the homes cost less and half cost more. CoreLogic provided information for the first five months of each year to provide an apples-to-apples comparison.
The sales of existing single-family homes make up the vast majority of the housing market. But the median sales price also has risen for new homes in Modesto, from $193,500 four years ago to $383,500 now.
Home prices also have rebounded in Turlock, Oakdale and Ripon in the past four years. The median price for an existing single family home in January through May of this year was $310,100 in Turlock, $349,500 in Oakdale and $461,500 in Ripon.
Home prices in Ripon are nearly at their 2006 peak of $462,000, according to CoreLogic. The 2006 peaks for Modesto, Turlock and Oakdale were $339,000, $360,000 and $387,500, respectively.
Three veteran real estate professionals say the Modesto area remains a strong market, though there are concerns for the future, including rising interest rates, the impact of a state proposal to take more water from this area, that not enough homes are being built and local buyer’s ability to afford more steep increases in prices.
Deni Royer — a Realtor with Berkshire Hathaway HomeServices Drysdale Properties and who has been selling homes in the Modesto area for 34 years — said she is seeing the traditional mix of home buyers, including lots of locals who are downsizing or want a bigger home, baby boomers moving here to be closer to their kids and grandkids, retirees, skilled workers and executives relocating here for work, with some buyers from the Bay Area in search of more affordable homes.
Indeed, Vega said many of her neighbors in the Cypress Grove development off Oakdale Road in northeast Modesto are from outside the area, including the Bay Area and as far away as Los Angeles. Century Communities junior agent Kristen Almanza, who is at the Cypress Grove subdivision, estimates at least 30 to 40 percent of their clients are from the Bay Area.
Prospective Bay Area buyers experience reverse sticker shock when coming out to the valley, like Jennifer and Frank Xu of south San Jose. The couple toured the model homes in Cypress Grove after helping their son move to Modesto to start a new job.
“These homes are a fraction of what you’d pay in the Bay Area. This home would sell for $1.5 million there,” said Frank Xu. The new three-to-four bedroom homes in Cypress Grove sell for between $374,900 to $460,000.
New construction in particular has been in short supply in the region. Many of the major developers like Century Communities and Florsheim Homes didn’t start building again in earnest until last year.
“The market is very, very strong,” said Tom MacDonald, a Realtor with the MacDonald Group at PMZ Real Estate and who has been selling homes in the Modesto area for 45 years. “There is a shortage of inventory, and that is pretty much in all price ranges. There’s been virtually no new construction since the early 2000s.”
It’s a sentiment echoed by Florsheim Homes sales representative Ryan Nickell as he showed homes in the company’s new Rose Park 5 and The Groves subdivisions, also in Village I. As home prices in the Bay Area continue to climb, people from Tracy and Manteca have started looking to the east.
“I hear all the time for the price of rent there they can buy a home here,” Nickell said.
MacDonald said another thing he’s seeing is some homeowners are reluctant to sell because they fear they won’t be able to find anything they want to buy. He said his company has structured transactions so a home doesn’t sell until the homeowners have found their next home.
MacDonald said Modesto home prices could be back at their 2006 peak by late 2019 provided the market doesn’t change too drastically, such as steep increases in interest rates.
Aaron Lewis — president and broker of Realty One Group Gold and who is in his 15th year selling homes in the Modesto area — said institutional buyers and investors who bought homes as rental properties are taking their profits and getting out of the market.
Lewis said he is seeing a lot of younger people who are buying their first homes. He said that’s a great sign because these first-time home buyers will put down roots and work to make their neighborhoods and communities better. He said everyone benefits when that happens.
For those coming from outside of the state altogether, like Andrea Mace, touring valley homes has been a crash course in California real estate. The mother of three boys and her husband moved from Columbus, Ohio, to Modesto about six months ago. In Ohio, she said, a 4,000-square-foot home would sell for about $350,000. No home they toured recently was listed for less than $370,000.
But, she said, things could be worse.
“Yeah, it’s more expensive than Ohio. But to me Modesto at least seems a lot more affordable than San Diego and the Bay Area,” she said.
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