The inventory of residential homes for sale in Merced is growing but slower than in recent months and houses are taking a little longer to sell, longtime real estate professional Loren Gonella reported at a recent Builders Forum hosted by the City of Merced.
Gonella told a room full of builders, bankers, financing experts and business-city leaders gathered at the Merced Civic Center that the median price for a home sold in Merced was $285,000 in April; in July 2017 that figure was $255,000 and in June 2018 a $270,000 median price was noted.
A broker associate in the Coldwell Banker Gonella Realty office in Merced, Gonella began his career in 1977 and he estimates he has sold hundreds of homes during that time.
He says the future of housing in Merced looks great with growth from the University of California Merced and the prospect of Altamont Commuter Express trains coming south to Merced.
“There is a lot of building taking place in Merced and that’s good,” Gonella says. “Essentially residential real estate will continue to increase but at a slower pace.”
From 2008 to 2013, about 1,500 homes should have been built in Merced but only 50 were constructed. This area is still suffering the consequences of that slowdown. This area has experienced a little bit of a market shift and more price reductions are likely.
Still, Gonella noted there are eight housing subdivisions being built now in Merced. He said interest rates are phenomenal, the same as they were in the 1960s.
A lack of housing inventory naturally will produce fewer sales, Gonella explains. Now there is 2.1 months worth of housing inventory available. Inventories are growing but slowly.
A home in Merced may be on the market for 52 days, a 40 percent increase from two years ago. Senior citizens are hanging on to their properties and not moving, according to Gonella.
Last year the city of Merced issued 667 building permits for new residential homes. The city of Merced had more home building permits issued in 2018 than the cities of Modesto and Stockton combined.
Gonella said the available rental inventory is tight, especially in apartments compared to single-family homes. That translates into a 1 percent vacancy rate.
Home rental costs are between $1,400 and 1,500 a month for a three-bedroom home and rents are $1,550 to $1,600 a month for a four-bedroom home. The need for duplexes, triplexes and fourplexes is especially acute, Gonella says.
“It is cheaper to own than rent,” Gonella says.
On the commercial front, Amazon is killing retailers. The combination of lower per-capita income and growing online shopping trends are proving very challenging to retailers and shopping centers – but good retailers and malls will survive, Gonella believes.
One of the biggest needs right now is for more new medical office spaces.
“We may even see a reduction in interest rates which may spike demand. Buyers get more opportunities to get properties and inflation is receding. The wild card may be limits placed on property tax deductions. Hopefully that won’t become an issue,” Gonella said.
John Beckman, Stockton-based chief executive officer of the Building Industry Association of the Greater Valley, said there were 307 new housing units built last year in the city of Merced, with 5,388 new people moving here.This area should have built 1,500 houses during that time.
The United States is recovering from past financial hardships better than California. This state is not keeping up with supply and demand, according to Beckman.
The median age of a home sold in Merced County is 31 years. Americans’ debt burdens are increasing, particularly with paying off student loans for colleges and universities.
Beckman also is very concerned about future increases in prevailing wages and what that will do in home construction costs and consequently housing affordability.
“Prevailing wage (rules) help some people but hurt many more,” Beckman said.
At the start of the three-hour Builders Forum, Merced Mayor Mike Murphy sounded a note of optimism.
“It’s a good time to live in Merced. There is a lot of growth and optimism. There is a tremendous amount of growth and diversification in the private sector and Merced is a great place to make that investment.” Murphy said.
Merced’s best days are ahead of us, the mayor concluded.
The forum also covered an update on the Campus Parkway construction and city capital projects. Growth at Merced College and UC Merced’s Project 2020 also were highlighted.