“I think it’s going to be a phenomenal market for some people for most of 2023,” Rocha said. “The individuals I’m talking about are the individuals or buyers who aren’t sitting on a lot of money, people sitting on about $15,000 or $20,000.”
According to RedFin.com, the median sale price for homes in Stanislaus County in September was $445,000, down from April’s all-time high of $480,000. That’s well below the $829,760 listed by the California Association of Realtors (CAR) on Friday as the median-priced existing single-family home statewide. A minimum annual income of $192,800 was required, according to the CAR’s Traditional Housing Affordability Index, to qualify to purchase an existing statewide median-priced single-family home in the third quarter of 2022.
The monthly payment including taxes and insurance on a 30-year fixed rate loan would be $4,820, assuming a 20% down payment and an effective composite interest rate of 5.72%. The effective composite interest rate was 5.39% in the second quarter of 2022 and 3.07% in the third quarter of 2021. The average 30-year fixed rate mortgage hitting a 20-year high at the end of September.
So what makes Rocha think 2023 could be a good year to buy? It’s a combination of house prices continuing to fall, high interest rates leaving many buyers hesitant, and a recent construction halt that is expected to impact markets in 2024 and 2025.
“What is different in this market and in 2023 is that there is less competition because of the tariffs. More than likely, buyers won’t be competing with 10 or 15 other people for the same home,” Rocha said. “But I fear for what will happen in the future because we have stopped building houses, and I think that is the worst thing that could have happened. What will happen is that a Once rates improve, there will be demand to buy again and there won’t be enough supply, and then house prices will skyrocket.
Rocha uses the 2008 recession and the housing market of the following years as a benchmark. He explained that home building saw a similar halt from 2009 to 2012, which contributed to strong demand and inflated prices.
Rocha noted that people sitting on $15,000 to $20,000 tend to be younger people, many of whom have recently left college. He said this demographic tends to rent rather than own. Rocha thinks that could be a mistake in years to come given that the current average cost of rent in the Modesto metro area is $1,657, according to RentCafe.com. He warns that he sees no end in sight for rising costs.
“Even though house prices are falling, rents are holding up. And they’re not just going to hold, but they’re going to keep going up,” Rocha said. “So if you’re in a situation where you think today’s mortgage might be a little bit higher than you’d like to pay, you have to be prepared to ask yourself, ‘Am I willing to pay this? what is today’s mortgage? for rent? And in the next five or six years?”
Rocha thinks a recession coupled with an increase in the cost of living in the Bay Area will be a major factor in driving up rental prices in the Central Valley.
“Rents will rise as people start losing their jobs and unfortunately they will have to sell. I also have a feeling rental demand is going to continue to increase as more and more people pass through Altamont,” he said.
“I get it, it’s easier said than done, but there are a lot of people who are afraid of pushing them not to do something right now that’s going to benefit their life,” Rocha added. “You’ll be hard pressed to find someone who bought a house and wasn’t nervous about buying it. Everybody’s nervous, everybody’s scared when they pull the trigger on this house. But ask that same individual if they’re glad they bought when they did, and the answer is always a resounding yes.
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