Median home prices in Modesto are sky-high. Here’s what it means for the local market
Modesto experienced the fourth-highest change in median home prices among all U.S. metro areas this year, according to a new report.
Median home prices increased by 10.92% in Modesto between December 2020 and June 2021, found the report, which is based on data from HouseCanary and analysis by Credible.com. This marks a median price increase from $387,432 to $429,732.
“Relative to the state, we’re still fairly affordable,” said Chad Costa, a senior managing broker at ReMax Executive in Modesto. “It’s hard to digest that because prices have gone up so much.”
Compared to other areas of the country, southern and western states have experienced higher price growth, according to the report. Of the 25 metro areas in the ranking, the top three highest median home prices can all be found in California. Sacramento, Stockton and Riverside boast the highest numbers.
The biggest increases ahead of Modesto were No. 1 Boise (12.99%), followed by Provo-Orem, Utah (12.22%) and Ocala, Florida (12.1%). Stockton (9.47%) was seventh.
Median price increases across the country are driven largely by the nationwide inventory shortage, as well as low interest rates due to the COVID-19 pandemic and resulting economic crisis and high levels of demand among homebuyers. The top 25 metro areas saw a cumulative median price increase of 9.32% over the course of the first half of 2021, the report found.
In addition to an inventory shortage, an increase in lumber and construction costs also is pushing up prices. Add to that an ongoing trend of individuals moving from more expensive regions, like the Bay Area, to more affordable ones like the Central Valley, and cities including Modesto feel the effects on their own markets.
Costa said he’s seen the local market slow down a bit in recent weeks. A few months ago, houses would get up to 20 offers, but now Costa said the average is around five to 10.
“The buyers are just taking a step back and thinking, ‘Is this house really worth $500,000?’” he said. “The answer is probably not. That’s what we’re kind of getting to ... pumping the brakes a little bit and taking a second look at this, which is probably not a bad idea.”
Looking forward, Costa said, he doesn’t expect interest rates to rise dramatically anytime soon, leaving potential buyers with more purchasing power. Eventually, he said, the market — which historically realigns every 10 to 15 years — will reach an inflection point and prices will lower again.
That’s unlikely to happen in 2021, however.
Until then, he predicts more people will move into the Central Valley from other regions in the state. Where that leaves local buyers with less purchasing power is still unclear: some are finding houses in the area and others are being priced out of what has long been considered the more affordable part of California, heading out of state or to more remote cities.
“They would have to probably move out of state in order to get those lower price points,” Costa said, “unless they wanted to move to the outlying areas ... but I don’t know if people are willing to make that much of a drive.”
This story was originally published August 19, 2021 at 4:00 AM.
