Homes in California's Central Valley are higher than they should be, report shows
MODESTO — New homebuyers beware! A new report shows homebuyers in Modesto and Stockton, are paying around 30% more for their new homes than what they're worth.
The report, done by Florida Atlantic University's College of Business, lists Stockton as the second highest for homebuyers. They are paying around 27% more than the "expected value" of the home. Sacramento ranked 7th, with an over 16% higher price than expected.
A home on Kruger Drive is selling for close to the exact average price of a home in Modesto, around $460,000. The expected price is around $350,000 – a more than 30% higher price.
While the price seems solid to many around the state, these prices are being driven up by a number of factors.
"This is our reality and this is what got us here today," said Daniel Del Real, a real estate broker and housing expert.
Del Real is not surprised to see Modesto and Stockton has some of the highest-growing home prices in the state. He is seeing higher prices for homes in Stanislaus County than ever before.
So why are these prices supposedly higher than they're supposed to be? Del Real says it's simply supply and demand, and there just aren't enough homes.
"If there's an oversupply, the prices will go down. If there's an undersupply, the prices will go up," he said.
Add that to people from outside of the city wanting to move into the valley to buy a home and commute. Now you have a market that, in Del Real's eyes, is under-supplied.
If more homes aren't built, Del Real says "the problem is only going to get worse."
One solution? Del Real feels the city can incentivize builders and contractors to build more in the city.
"There has to be a way for the municipalities and the local people in control of that to be able to partner up with builders and developers to streamline some of these projects," he said.
So what is the city of Modesto doing to try and bring these prices down?
Jessica Hill is the Director of Community and Economic Development. She says the city is building right now.
"Right now, we have over 4,000 houses in the pipeline and we're just waiting for the private developers to start building," Hill said.
CBS13 did a story earlier this year on homes being built throughout the state.
According to the Attorney General's Office, California needs around 2.5 million new homes by 2030 to bring down costs down. However, the state is only on track to build 100,000 homes this year.
