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So is this the bottom?

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POSTED February 4, 2010 10:24 p.m.
Are things leveling out in the Manteca housing market?

•The median price of existing home sales that close escrow has been virtually at a steady $175,000 for close to six months when you look at any particular point in time and include all homes sales going back 90 days.

•New home builders enjoyed – at least compared to home builders elsewhere in San Joaquin County – 304 new home starts in 2003. The median sales price is just under $295,000 with the starting point for many new homes at $199,900.

•Banks – whether through design or hap stance - are adjusting the flow of foreclosures on to the Manteca market to compensate for the upswing in owner occupied homes that aren’t in danger of foreclosure that are now being put up for sale.

There’s still a ton of variables out there ranging from interest rates, California’s 12 percent unemployment rate (its 15 percent in Manteca and 17.2 percent in San Joaquin County), more foreclosures on the way ,the NUMNI plant closing on April 1, and the tax credit that  goes away in a few months.

However, you need to remember that 1,211 existing Manteca homes sold in 2009 along with 304 new ones in a time that everyone agrees was the absolute worst year in The Great Recession. Most economists don’t expect 2010 to be worst and some are saying a recovery is underway although significant drops in jobless rates are still a few years away.

Now weigh that against a snapshot of the “recent” new homes and new home sales prices.

In normal circumstances, new homes are what power market appreciation. As home prices increased from the mid-1990s to the mid-2000s, it was older homes that chased the new ones. Arguably the host of growth fees that add $40,000 or so to a typical new home worked to the advantage of older ones. Without the growth fees to worry about in the selling price, appreciation was significantly higher for those homes 15 years or so old.

Then when the market started changing, new homes again led the way but for the first time in recent memory into a nosedive. Builders make a living selling to the market. They slashed away and trimmed costs where ever they could while many existing home buyers with similar homes were trying to get $40,000 or more for virtually the same home a developer was building with the exception it was a lot older.

Now the tide is “kind of” shifting back to normalcy.

Three builders have priced their smallest homes – typically in the 1,500 to 1,700 square foot range – at $199,900. It is level they are getting sales at. Keep in mind though, most new homes are selling for more.

D.R. Horton – that just rolled out the newest tract home in Manteca – offers 1,614 square feet for $199,900. Compared that to similar homes in terms of square footage that were built in the past decade.

Existing “newer” homes right around the same square footage that have sold in Manteca in the last few months include:

•$171,600 for a home at 519 San Gabriel.

•$155,000 for a home at 1695 Sallie O Drive.

•$156,000 for a home at 327 Tannehill Drive.

By “kind of” moving back to normalcy, builders realistically can’t build for less than $199,900. They no longer can be slapped with the unjustified bad rap that they are lowering the market in terms of prices since the market does that on its own.

The bottom prices will start moving back up over $200,000 once the existing home market chips away at the $40,000 plus gap. In other words, the new home builders must have a housing recovery among foreclosed homes to return to normal times although at a much lower price level.

If developers didn’t build new homes it would be because there wasn’t a market which means existing home prices would be further depressed.

All of that aside, there are people out there who have no intention of buying an existing home and are positioned well enough to buy new when they decide to move. While they have more money than the typical buyer is willing or can pay today, they aren’t candidates for existing homes.

Regardless of whether you view new homes as a downer when it comes to prices, you still should be encouraged by how the market is readjusting. It doesn’t mean big increase in value is on the way any time soon but it does mean the worst is probably over.

STEAL OF THE MONTH: The January steal of the month for Manteca might just be a five bedroom, three bathroom home with 3,305 square feet at 366 Vasconcellos Avenue that closed escrow for $162,000 last week.
That translates into $49.01 per square foot. Compare that to what it costs a builder today to finish a lot and build a 2,000-square-foot home. Before it is sold, the developer has shelled out $75 a square foot without a penny in return.
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