Home prices climbing amid few available spaces

Merced’s long period of low housing prices is becoming a thing of the past, with limited supply and strong demand fueling a rise in home values, according to local real estate agents.

Home prices in Merced jumped 10 percent in July compared with the same time last year, according to CoreLogic, a research firm that tracks home sales.

The Merced area’s increase outpaced the national average of 6 percent, and topped individual state averages for all but two states – Oregon and Washington.

An expanding UC Merced plays a large part in the high demand for housing in Merced and surrounding communities, according to Andy Krotik, a real estate agent with Coldwell Banker Gonella Realty in Atwater.

Krotik said the Merced County Association of Realtors tracked the increase as 9 percent higher in July compared with last year, and 26 percent higher than 2014.

Many homes are being snatched up by buyers who look to rent them out to students and faculty. When those houses become available, rental applicants line up quickly.

“There was a period of about seven years where there was virtually no new home construction, so it’s catching up with us,” he said.

UC Merced is moving into its second phase of growth, called the 2020 Project, which is expected to double the size of campus and make room for 10,000 students. To that end, the University of California system is pouring $1.14 billion into the campus.

Real estate company Redfin tracked Merced’s median home price in August at $240,000, an 8.9 percent increase from the same time a year ago.

The home prices in Merced also rose faster than those in nine major cities highlighted by CoreLogic, including San Francisco, Miami, Los Angles and other metropolitan cities. Only Denver matched Merced’s price growth at 10 percent, according to CoreLogic.

Terry Ruscoe, owner of Merced Yosemite Realty in Merced, said his company, too, is seeing a shortage in spaces for rent. Of the more than 500 rentals his company manages, he said, he has a zero vacancy rate.

CoreLogic’s numbers include the sales of distressed homes, which includes those foreclosed upon or sold in a short sale, when a house is sold for less than what is still owed on the mortgage.

“We’re not seeing a lot of that anymore,” Ruscoe said. “Folks have kind of figured it out, especially in Merced, that if they wait long enough, they’re going to get their investment back out of it.”

Ruscoe said homes at a ticket price of $200,000 or less are selling easily. Those at the $300,000 mark tend to lag.

CoreLogic’s experts predict the prices will continue to rise.

“If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year,” Frank Nothaft, chief economist for CoreLogic, said. “The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5 percent over the next year.”

This story was originally published September 6, 2016 at 5:48 PM with the headline "Home prices climbing amid few available spaces."