Ready, set, buy a house? According to Michael Rocha of Atlantic Realty, the real estate market could look like a sprinting event at the Olympics in the coming months.

As 2024 gets underway, Rocha, who was voted Best Realtor by 209 Magazine readers in 2021 and 2022, is once again offering his yearly predictions for the local real estate market. And for the first time in over a year, he expects there to be some drastic change, predominantly coming by way of the Federal Reserve and their plans to lower interest rates at least three times this year in their efforts to help the national economy rebound from inflation and declines in the labor market. 

The high interest rates are currently keeping people away from buying as they are all waiting for any cuts. But when the cuts come, he believes the bidding will begin. 

“It’s pretty clear that overall prices of homes will be going up once they do cut interest rates,” Rocha said. “There are a lot of people in the same boat who are waiting for the lower rates and those who are waiting to save up a bit more and they’ll all be going up against one another.”

It’s going to take some time for any significant change to come, though. Following eight consecutive weeks of declines, the average 30-year fixed mortgage rate rose one basis point to 6.62 percent last week. The Fed is only expected to begin cutting interest rates significantly by its second meeting of the year in March. And with high rates continuing to make potential homebuyers hesitant, sellers are going out of their way to cover closing costs.

“We’re seeing a unique opportunity right now for homebuyers, particularly first-time homebuyers, to get in because of the sellers covering the closing costs, along with the State of California Down-Payment Assistance Program,” Rocha said, referring to the state’s Housing Finance Agency offering first-time homebuyer loan programs aimed at provide access to affordable first mortgages.

Also expected to impact the markets by the time rate cuts come will be the continued lack of new construction. In last month’s Valley Business Forecast produced by Gökçe Soydemir, the Foster Farms endowed professor of business economics at Stanislaus State, it was reported that there was a 9.62 percent decline in Valley building permits, reflecting a slowdown in the housing sector. Because of the significant inventory shortage, Valley home values saw an increase of 1.88 percent in 2023. 

The report also predicted that construction will continue to be slow in 2024 due to the price of materials, lack of workers and reduced affordability from potential buyers in the region.

Soydemir is expecting all employment levels to drop in 2024. And like the decline in the labor market, Soydemir and his team are projecting declines in wage growth rates and deflation in the next two years, meaning decreased purchasing power for Valley consumers. In 2023, average weekly wages increased by 6.01 percent, surpassing the overall price growth of 4.71 percent caused by persistent inflation, which resulted in a real wage increase and a purchasing power gain of 2.79 percent in the Valley.

“It just doesn’t make financial sense for builders right now,” Rocha said.

Nevertheless, the city of Turlock is a bit of an outlier as it is one place where new housing is being built with the Legends North III residential neighborhood on the northeast side of town, a project spearheaded by JKB Living. The new community will have 65 building sites, with several already having been sold. Rocha doesn’t view the new homes to be entry level, which can be good and bad.

“These aren’t entry level homes. These are homes for people with a bit more financial security. But what I hope is that these homes bring out sellers' entry level properties. The fact of the matter is that we need entry level housing, and right now, that’s only dependent on if local residents move into other homes and open up spots for people getting into a home for the first time,” he explained.

Rocha advises to not get caught up into the hype, though.

“If you’re good financially, you don’t have to rush or wait, you are afforded the option to do whatever you want. You can stay in your home, you can try selling as soon as you can, or you can just wait, though the competition comes with it. Do what you want, and that goes for most people regardless. If you’re comfortable where you’re at right now, you obviously don’t have to sell your home or buy a new home. 

“I tell my clients all the time, if you like where you’re at and you have a 2 to 3 percent interest rate, keep it. If you’re someone who has a lot of personal high interest debt, you shouldn’t be looking to add more payments. You need to take care of your other obligations first. Always do what’s financially best for yourself and always do what you feel comfortable with.”