Merced County housing market continued to hum along in mid-autumn

In Merced and the surrounding area, home sales continue to be spurred by a growing UC Merced, few homes on the market and other factors, real estate agents reported Thursday.

There were 276 properties sold in October, the most recent numbers available, a 115 percent increase from the same time last year, according to numbers from Corelogic Inc., which tracks the housing market.

Andy Krotik, a real estate agent with Coldwell Banker Gonella Realty in Atwater, said his office has been so busy, he was showing homes on Christmas Eve. “Since the election, we are on fire,” he said.

Merced has a vacancy rate of 1 percent, city staffers have said, which adds to the demand for homes for sale, Krotik said. Mortgage rates began to surge after Donald Trump’s presidential win in November, making it more expensive to purchase a home.

The average rate for 30-year fixed-rate mortgages was 4.3 percent last week, up from a 52-week low of 3.4 percent, according to mortgage buyer Freddie Mac.

“Whenever interest rates start to edge up, people get off the fence,” Krotik said.

The growing UC Merced community also puts pressure on the market. The campus broke ground this year on Project 2020, a plan to double the size of the campus and make room for 10,000 students. Along with adding students, UC Merced expects to add about 150 faculty members and 150 staffers to its existing rosters of 511 and 994, respectively.

That growth has put pressure on prices for homes and apartments, agents have said. The average home sold in November was $228,000, a 9.5 percent increase from the same time last year, according to Corelogic.

Nationally, fewer Americans signed contracts to buy homes in November.

The National Association of Realtors said this week that its seasonally adjusted pending home sales index fell 2.5 percent to 107.3, the lowest reading since the start of 2016. Pending sales declined in the Midwest, South and West, while improving in the Northeast.

The slowdown marks a reversal for the housing market, as sales growth has been solid for the past year. Completed sales of existing homes in November climbed to their highest pace in nearly a decade, reaching a seasonally adjusted annual rate of 5.61 million, the Realtors said last week. But the pending sales contracts suggest that demand may be weakening now that the costs of purchasing a home have increased.

Pending sales contracts are a barometer of future purchases. A sale is typically completed a month or two after a contract is signed.

Rising rates could make existing homeowners less likely to put their property on the market, since it would require them to finance the purchase of a new home at higher interest rates.

Inventories are already squeezed. Fewer than 1.9 million homes were on the market in November, a 9 percent decrease from a year earlier. The shortage of listings has pushed up prices over the past year.

But higher mortgage rates might leave buyers reluctant to pay a premium. If rates go up to 5 percent within the next year, nearly half of the real estate agents surveyed by the brokerage Redfin say their customers would begin searching for cheaper homes.

“Many of my clients – both buyers and sellers – have expressed concern and hesitation about increasing mortgage rates,” said Arto Poladian, a Redfin agent in Los Angeles.

This story was originally published December 29, 2016 at 5:55 PM with the headline "Merced County housing market continued to hum along in mid-autumn."