Modesto’s housing market is ‘one to watch.’ Here’s what that means for buyers and sellers.
Zillow, the national real estate database, has ranked Modesto as one of its top dozen mid-sized markets to watch in 2020.
Modesto is ranked 8th in the nation, and highest in California.
The other California city to make the ranking was Visalia (No. 10). Leading the list are Boise, Idaho; Huntsville, Alabama; Ogden, Utah; and Spokane, Washington.
Zillow defines mid-sized markets as cities ranked by population size between 75-125 of all U.S metros. The company’s analysis weighted five variables to determine its list:
- Home value growth year-over-year
- Forecasted home value growth
- Days a home stays on the market
- Share of homes sold above list price
- Month-over-month sale counts
According to Zillow’s home value index, which measures home value over time, houses in Modesto are worth on average $340,762. The city’s home value growth year-over-year is 6.9%, its forecasted home value growth is 4% and a home typically stays on the market for about a week. In Modesto, 39.1% of homes are being sold above their list price, but there is a 10% drop in month-over-month sale counts.
Daniel Del Real, a broker associate at PMZ Real Estate and the Del Real Group, said the Zillow rankings fall in line with his own perception of the local market, which is experiencing high price adjustments due to the effects of the coronavirus pandemic.
Del Real said there are three main factors that have shaped the current housing market in Modesto since March. First, there was a market stall back when the COVID-19 pandemic first hit California. Buyers took their homes off the market, further depleting inventory levels that had been sinking for months.
“We were already positioned at the lowest amount of inventory,” Del Real said. “It caused an inventory shortage.”
Then the Federal Reserve dropped interest and mortgage rates, sending buyers back into a market with a significant lack of inventory. Those buyers were now able to afford homes at a higher price-point, Del Real said, as a result of the lowered rates.
Finally, with many people now working from home and no longer having to commute to jobs in expensive regions like Silicon Valley and the Bay Area, more affordable markets like Modesto are experiencing an influx in new buyers.
“It’s been the third month in a row where there’s more pending sales, almost by double than there is active homes on the market,” Del Real said.
Modesto described as a seller’s market
Last week alone, there are 351 active listings in Stanislaus County, and 662 pending sales. The county is currently in a seller’s market, with an average of 460 sales in August compared to 341 listings.
A big issue going forward will be ensuring an increase in inventory levels, Del Real said. While there are new housing developments popping up across the city, he said that the current rate of construction and development isn’t enough to fill the current gap in inventory.
“As we move forward in 2021, if we don’t fix that supply, then there’s always going to be pressure on that pricing,” he said.
He said that as pandemic unemployment checks and stimulus money wanes, 2021 might bring with it more financial pressure that leads people to sell homes and either downsize or move out of state. This, in turn, will make room for those looking to move into larger homes, while their houses will become available to first-time buyers or those looking at lower price points.
This won’t necessarily result in an inventory increase, Del Real said, but rather an uptick in transactions.
Overall, Del Real said, there’s one key to success in the current housing market: “Have some patience.”
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 September 22, 2020 at 5:00 AM.
CORRECTION: This story has been updated to correct the name of the real estate agent quoted. His name is Daniel Del Real.
