Rents and housing prices keep increasing in Modesto. Here’s what that means for buyers
Both buyers and renters are seeing high prices in Modesto’s housing and rental markets, in line with national trends.
The COVID-19 pandemic, coupled with a nationwide housing inventory shortage, has put both buyers and renters in a tight spot and raised prices considerably. In Modesto, the median sale price for a house was $430,000 in January, according to MLS data from TrendVision. Meanwhile, average rent prices for a one-bedroom apartment were $1,525 the same month, while a two-bedroom apartment had an average rent price of $1,817, according to data from Rent.com.
Comparatively, median sale prices in January 2021 were at $368,000, while average rent was $1,256 for a one-bedroom and $1,445 for a two-bedroom.
Daniel Del Real, a broker associate with PMZ Real Estate, noted that the interest rates for buyers have been increasing more aggressively than expected, following two years with very low rates due to the pandemic. Additionally, inflation is at a high, which affects everything from purchasing power to the supply chain, which is experiencing issues with materials needed for construction.
All of these factors come together, Del Real said, to slow down buyers.
After a market slowdown in the winter months, he added that he expects activity to pick up again in the spring.
In December 2021, Modesto had 0.3 months’ worth of inventory in the housing market; in January, that number rose to 0.6. But that’s far from a healthy market, which Del Real said usually has four to five months’ worth of housing stock.
“I don’t think it’s sustainable,” he said. “We really want it to go up. We can balance it out a bit more ... but with the fundamental issue of housing and just a shortage of housing, I think inventory issues are always going to be an issue.”
Del Real said the city and county would have to quadruple its available housing stock to catch up, but he doesn’t see that happening very quickly. His biggest piece of advice to buyers is to look at their lifestyle when they decide whether or not to buy: Do they see themselves staying in the house for a long time, or would a short-term rental be a better option for the time being?
Brian Carberry, the managing editor for Rent.com, told The Bee in an email that he believes rents will continue to rise through 2022, but the rates will be lower.
“One reason for the extreme changes from 2020 to 2021 was a depressed market in many areas in 2020 due to the pandemic,” he said. “So while rents did rise in 2021, the percent change also reflects the dip in 2020, which created a larger spread than if rents had stayed flat in the early months of the pandemic.”
But the factors that are increasing rents are likely to remain, he added, with vacancy rates at nearly 40-year lows across the country and fast-paced housing markets.
“Unfortunately, the market is not very favorable toward renters at the moment,” Carberry said. “They may need to look for cheaper neighborhoods or downsize within their own neighborhood.”
To help fund The Bee’s economic development reporter with Report for America, go to https://bit.ly/ModestoBeeRFAThis 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.
