Michael Rocha of Atlantic Realty has been in the real estate industry for the past six years, having worked throughout Stanislaus County amid unique circumstances such as the COVID-19 pandemic and fluctuating interest rates. As 2022 winds down and inflation is not expected to ease anytime soon, Rocha – who was voted Best Realtor by 209 Magazine in 2021 and 2022 – has made some bold predictions for the real estate market in the coming year.
“I think it’s going to be an amazing market for certain people for most of 2023,” Rocha said. “The individuals I’m talking about are individuals or buyers who aren’t sitting on a lot of money, people who are sitting around $15,000 or $20,000.”
According to RedFin.com, the median sale price of a home in Stanislaus County in September was $445,000 – down from April’s historic peak of $480,000. This is far below the $829,760 listed by the California Association of Realtors (CAR) on Friday as the statewide median-priced, existing single-family home. A minimum annual income of $192,800 is required, according to CAR’s Traditional Housing Affordability Index to qualify to purchase a median-priced, single-family home available in the third quarter of 2022.
The monthly payment, including taxes and insurance on a 30-year, fixed loan, would be $4,820, assuming a 20 percent down payment and an effective composite interest rate of 5.72 percent. The effective composite interest rate is 5.39 percent in the second quarter of 2022 and 3.07 percent in the third quarter of 2021. In anticipation of the Fed’s strong push in rate increases over the past few months, the market continues to put upward pressure on the resulting yield. The average 30-year mortgage hit a 20-year high at the end of September.
So, what makes Rocha believe that 2023 could be a good year to buy? This is a combination of housing prices continuing to fall, high interest rates causing many buyers to hesitate, and the recent halt in construction expected to affect the market in 2024 and 2025.
“What is different about this market and the year 2023 is the lack of competition because of the price. More likely, buyers will not compete against 10 or 15 other people for the same house,” said Rocha. “But I fear what will happen in the future because we stop building home, and I think that’s the worst thing that could happen. What will happen is that when the price gets better, there will be more demand to buy and there won’t be enough supply. Then, house prices are going to go up again. “
Rocha uses the 2008 recession and the housing market of the following years as a reference. He explained that the construction of houses saw a similar stoppage from 2009 to 2012, which contributed to high demand and inflated prices.
Rocha said those sitting on $15,000 to $20,000 tend to be young people, many just out of college. He said this demographic tends to rent rather than become a home owner. Rocha believes this could be a mistake in the coming years considering that the current average cost of rent in the Modesto metropolitan area is $1,657, according to RentCafe.com. He warns that he sees no end in sight for rising costs.
“Even if house prices are going down, rents are going to stay the same. And they’re not just holding back, but they’re going to keep going up,” Rocha said. , you have to be willing to ask yourself, ‘Am I willing to pay what mortgage now. for rent? And in the next five or six years?’”
Rocha believes that the recession paired with the rising cost of living in the Bay Area will be a big factor in the rising rent prices in the Central Valley.
“Rents are going to be higher when people start losing their jobs and unfortunately have to be forced to sell. I also feel the demand for rentals is going to continue to rise as more people cross Altamont,” he said.
“I understand, it’s easier said than done, but many people’s fear prevents them from doing something right now that will benefit their lives,” added Rocha. “You’d be hard-pressed to find someone who buys a home and isn’t nervous about the purchase. Everyone’s nervous, everyone’s scared when they pull the trigger on that home. But ask those same people if they’re happy with the purchase when they buy it, and the answer is always yes.