Rising interest rates, low inventory impacting Monterey County real estate – Monterey Herald

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MONTEREY – Monterey County’s median home price held relatively steady at $857,000 compared to this time last year when it was $852,778. Though inventory only slightly decreased by 1%, new listings fell 18%, and homes for sale stayed 33% longer on the market compared to last year.

“The record median home price was March 2021, at $918,500,” said Monterey County Association of Realtors Government and Community Affairs Director Adam Pinterits. “The (highest) median home price this year was again in March, at $912,000.”

Month-over-month, June’s median home price was down 5% from May when it was $900,000, inventory increased 7%, the number of new listings of homes on the market fell 17%, and homes stayed on the market longer, increasing 33%.

Pinterits said that many factors contribute to the recent increase in average days on market, but rising interest rates are an important factor.

In May, national figures showed that mortgage rates were up 230 basis points from a year ago (1 percentage point equals 100 basis points) from 3.01 to 5.31%. Compared to one year ago, the monthly mortgage payment rose to $1,842 from $1,220, an increase of 51%, and median family income rose by 4.5%.

According to the National Association of Realtors, the annual mortgage payment as a percentage of income increased to 24.4% in May from 16.9% a year ago. Largely due to higher home prices compared to modest gains in median family incomes and higher mortgage rates. Regionally, the West has the highest mortgage payment to income share at 35.8% of income. Mortgage payments are not considered burdensome if they are no more than 25% of income.

MLSListings’ county summaries reported that a Monterey County median single-family home cost $857,000 in June and sold for 100% of the list price, compared to Santa Cruz County where the median single-family home cost $1.325 million and sold for 104% of the listing price. In Santa Clara County the median cost was $1.8 million and sold for 106% of the listing price, and in San Mateo County where the median single-family home cost $2 million and sold for 109% of the list price. In San Benito County, the median single-family home cost $859,500 in June and sold for 99% of the list price.

In Monterey County, the drop in the number of new listings cannot be attributed to just one cause, said Pinterits, who added that typically there is a rise in spring, so a dip in the month-over-month comparison from May to June is not altogether surprising.

“Interest rates are again a factor as those looking to sell are often buyers in turn and may be hesitant to sell when they then have to buy at higher rates,” he said.

Monterey County’s median home price is not likely to decrease significantly this year or in the foreseeable future as long as supply is outweighed by demand, said Pinerits.

“In the long run the single greatest factor to address affordability, especially on the Monterey Peninsula, is a new, sustainable, and drought-proof water supply,” he said. “Until such a supply is established and housing inventory is increased, supply is unlikely to ever come close to meeting demand.”

Monterey County’s real estate market is being impacted by rising interest rates contributing to increases in median days on the market and decreases in new listings and overall inventory prompting potential sellers to consider waiting and maybe renting out the property.

“This may reverse somewhat if interest rates come down, and if new proposed rental regulations drive them to sell instead,” said Pinterits. “This in turn could contribute to ongoing rental availability and affordability issues. It comes back to an inventory problem, insufficient housing supply exacerbated by a lack of water supply and new construction continue to be driving factors in our housing market trends.”

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