Modesto is one of the most popular housing markets, but inventory is running out
Modesto ranks 12th among the nation’s most popular housing markets, a new survey finds.
According to data from Realtor.com, Modesto was among the 20 “hottest” real estate markets in the country for March 2021, a ranking based on market demand and the pace of the market as measured through listings on Realtor.com’s website.
Modesto is joined in the top 20 by five other California markets: Vallejo-Fairfield at No. 3; Yuba City at No. 7; Santa Cruz-Watsonville at No. 8; Stockton-Lodi at No. 9; and Eureka/Arcata/Fortuna at No. 18.
Manchester-Nashua, New Hampshire, ranked No. 1.
A Trendgraphix report shows there were 85 homes for sale in March 2021, down from 204 in March 2020. Sales, on the other hand, remained at a comparable rate: in March 2021, there were 155 sales compared to 149 in March 2020.
Chad Costa, a senior managing broker at ReMax Executive, said he’s noticed high demand and low supply in the Modesto market over the past year.
As the pandemic hit and interest rates were pushed to extremely low levels, buyers were suddenly able to afford houses they previously would not have, he said. Additionally, the increase in remote work had many seeking to buy bigger houses – to accommodate a home office, for example – or move out of high-priced areas like the Silicon Valley to lower-priced parts of the state.
These factors, Costa said, exacerbated an already strained market with little inventory. In April 2020, he said, there was 1.9 months’ worth of inventory in the market based on closed sales. A year later, he said, inventory has plummeted to just two weeks’ worth.
That lack of inventory is already a concern, Costa said. “Unfortunately, many buyers that live in this area and work in this area have really struggled to find a house that they can afford,” he said.
ReMax broker says many being priced out
Because sales are closing so rapidly and buyers have more purchasing power, Costa said buyers often need to have cash reserves on hand when they’re making an offer. Many people are being priced out, he added, and no longer are able to compete in a market where a single property might get 10 offers.
This lack of inventory is a nationwide issue. After the 2008 financial crisis, home building slowed drastically and hadn’t picked up again in earnest until about 2018. As a result, markets across the country are straining under a lack of inventory.
“That’s one of the biggest factors as to why we’re behind the curve,” he said.
One thing that might help the market adjust is forbearance — or a deferral of mortgage payments due to pandemic-related financial stress — Costa said. As those payments become due, some homeowners will be forced to sell their properties, injecting the market with a bit of inventory.
“That may help a little bit,” he said, “but we have such a big hill to climb when it comes to inventory, I don’t see it drastically changing on the horizon.”
And despite the possibility of a temporary reprieve, Costa said the only long-term solution is more housing developments.
“The bottom line is, we need more housing,” he said.
This story was produced with financial support from the Stanislaus Community Foundation, along with the GroundTruth Project’s Report for America initiative. The Modesto Bee maintains full editorial control of this work.
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This story was originally published April 19, 2021 at 5:00 AM.
