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Will Home Prices Drop in Merced County Real Estate?

With housing prices in Merced County experiencing a steady climb for nearly two years, some investors, home owners, and prospective home buyers have been concerned about the housing market here entering a bubble that could burst without warning.

At Soldavi, we want to assuage those worries and confirm that a major price drop for not only the Merced County market but the nation’s housing market as a whole is unlikely to occur in 2022. This is backed by data we currently have on the markets (both local and national) and the opinions of experts worldwide analyzing the growing housing market.

Let’s take a look at the market we are currently experiencing in 2022 and then look forward to the rest of the year and what we can expect it to bring.

What we know in January 2022

Currently, from the latest data collected in December 2021, the median listed price for homes in Merced County is $368.6K. Using that as a guide to where we are now, we can look at median listing home prices back at the start of 2021 and see a 19.5% year-over-year increase from December 2020 to December 2021. This increase has been steadily pushing the market as far back as January 2020.1

An increase in prices can be good short term, but what about a steady, long-term increase? In today’s market, the number of buyers looking for a home far outnumbers the homeowners currently looking to sell. This has created a demand that to this day is still pushing the prices upward. As sales continue, the average time it takes to sell a house listed on the market has continued to drop. The median days on the market for Merced home sales was 64 days at the start of 2021. At the year’s end, these metrics have been as low as 44 days.1 With sales continuing at record speeds, this demand continues to influence the housing market, taking into account the basic economic principle of supply and demand. As demand increases, and supply either holds steady or decreases, prices naturally rise.

Until demand for houses has been satiated, or at least slows down, housing prices will remain higher than average for the rest of 2022. Leaving us to wonder will home prices drop in Merced County real estate in 2022? Let’s take a look!

What we expect for the rest of 2022

Real estate experts have expressed that they expect these rapid price increases to experience a slowdown. This is largely thanks to new construction allowing more homes to hit the market, alleviating the disparity between buyers and sellers. In economic terms, when supply increases to meet demand, prices will either remain steady or begin to drop.

There has been a lull in new construction for several years, and the pandemic has only exacerbated these issues, affecting the availability of construction materials as well as causing staffing shortages. The latest predictions indicate that high construction costs and staffing issues should become less pressing as we continue into 2022. As new home construction increases, home buyers will have an easier time finding the homes they desire. This will slow down the rapid increase in current home prices, but is not expected to cause a rapid drop in housing prices, as this shift is expected to be gradual and not cause a crash in the housing market.

Buyers and the demand they put on the housing market are going to be the backbone that keeps the market steady on its continued upward path. The price increases we have seen at the end of 2021 may not be as pronounced in 2022, but have been predicted to increase at least 3% before the end of the year. It’s a safe bet that we can count on the Merced County housing market to continue to remain strong in 2022. If you’re looking to buy a new home in Merced County, or if you own a home and are thinking about selling, reach out to Soldavi today. Our Realtors are client focused, and we are committed to helping you make your home ownership dreams a reality. To hear about more market news and to stay updated on Merced county real estate follow our blog!

1 Realtor.com, Merced, CA Real Estate Market, https://www.realtor.com/realestateandhomes-search/Merced_CA/overview

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