2018 was a good year for property owners in Merced County, with home prices growing faster than any other place in San Joaquin Valley.
According to a 2018 Business Forecast by California State University – Stanislaus professor Gökçe Soydemir, the 9.97% increase in home prices was driven by high demand and the low number of homes for sale in the county. He also predicted that home prices will continue to increase in 2019, though at a slower pace.
The median home value in Zillow was $244,000 at the time of the report, which was higher compared with $223,000 in December 2017.
Home prices in the cities of Stockton and Modesto followed closely behind at 9.91% and 9.79%, respectively, that same year.
The report also noted that home prices increased more slowly in the southern portion of the Valley.
Drivers of growth
Low inventory spurred home price increase in the county, but there’s another reason for soaring home prices – new construction has not been able to keep pace with growth.
Merced County has always had a high rate of ownership and vacancy. Despite the recent boom in construction, however, the number of housing units that had been built within the last decade hit an all-time low in 2018.
Moreover, the county issued just 172 building permits for single-family homes in 2017, according to the same report by Soydemir, which was lower than any other county in the Valley.
Throughout the 1980s, the county issued over 250 building permits each year, hitting a peak of more than 700 in a single year that decade.
But the number of permits issued per year started decreasing throughout the 1990s. Virtually no permits were issued in the years following the housing crisis of the 2000s. Many homes were also converted into rentals during this time.
In a healthy real estate market, the desirability of buildings goes down with age. But this has not been the case with Merced County.
Limited new construction has only increased the demand for older residential units, with buyers and renters opting to remodel these homes instead.
Although older properties have historically served as affordable housing, these housing units have become more valuable in Merced.
As previously mentioned, however, price growth is expected to slow down following a 5% increase in mortgage rates, curbing the demand for housing.
Builders respond to the need for more housing in Merced County
There are hundreds of new apartments in the pipeline. Many of these developments were driven by market demand, although city staffers have also recruited builders to supply Merced with new housing.
City staffers place the number of units planned for construction at around 800, but whether or not construction goes through depends on developers’ ability to secure funding for those projects.
Merced County and the City of Merced have also made plans to construct 120 affordable residential units, including 30 for homeless individuals, in the southern section of town.
Buying or selling in Merced County? Get in touch Soldavi Realty at 209.975.7653 and Info(at)Soldavi(dotted)com
to develop an action plan.