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Fence sitters can learn from history

Prices are soft now but give it some time

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POSTED March 5, 2010 1:20 a.m.
Six years ago this summer a bidding war was underway to buy the models of the popular east Manteca custom neighborhood known as Meadowlands located to the north of Joshua Cowell School.

It was a marketing strategy that attracted lot of attention given the fact many new home buyers were faced with spending a year or more on waiting lists while worrying if interest rates and prices would keep going up?

All you had to do was submit a sealed bid on one of two of the popular Meadowlands executive home models - complete with pre-approved loan letter and/or a verification of funds to cover the amount of your bid.

And, if your bid won, you could move in within 30 days.

One home was the White Dove, a single story at 1072 Pestana Ave., with an extended great room, 2,575 square feet of living space and a 9,900-square-foot lot that had a pre-appraisal value of $490,000. The minimum opening bid was $470,000.

The other was the Mockingbird, a two story at 1084 Pestana Ave., with 3,613 square feet of living space on a 9,900-square-foot lot that had a pre-appraisal value of $580,000. The minimum opening bid was $550,000.

As an added bonus all the furnishings from refrigerator, couches and dining room set down to knick knacks, came with the home. The furnishings weren’t included in the appraisals nor were additional square footage that lots have that is above and beyond a typical Meadowlands home site. That makes them “bonus items” that were essentially free especially if the high bids don’t exceed the pre-appraisal value.

The late Aldo Brocchini, one of the partners in the Meadowlands project, said at the time they were trying to come up with a way to be fair to the people who had expressed interest in buying the models.

There were 165 such potential buyers who had their names placed on a list to notify them when the model homes became available. In addition, anyone else could submit a sealed bid.

The bidding gamit was a big success.

So why bring up what now seems like ancient history?

It’s to point out a simple fact that housing – even without liar loans and such – has always been cyclical. While one can hope that we never return to the days of people who literally don’t have adequate income to qualify for mortgage debt being able to buy houses they can’t afford, the day will come when there will be upward pressure on prices that will start making it impossible for people who can now afford to buy a home to do so.

How long this window of opportunity will exist is anybody’s guess.

One thing is for sure, the first real pressure when it happens – as it does every time – is in rents.

Right now rents are soft and are doing anything but increasing. But once demand starts heating up, rents start creeping up and then the sale price of homes rise.

A 30-year fixed mortgage rate will essentially straight-line your monthly housing costs for the next three decades. Then, if you stay put, you have no mortgage payment or rent payment.

If you honestly don’t believe there won’t be rent increases, jumps in housing prices, and even a weird period of greed in the next 30 years happening not once but at least three or four times then don’t even consider buying a home.
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