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Manteca McMansions go McBust

The bigger they are, the farther the prices fall

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Manteca McMansions go McBust

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POSTED February 13, 2009 5:03 a.m.
The last McMansion sold by Seeno Homes in late 2004 set a record that has never been challenged - $750,000 for a new Manteca tract home.

It was the massive 4,336-square-foot floor plan that looked like a big, imposing rectangle box jammed onto lots immediately south of Joshua Cowell School in the East Manteca neighborhood of Heritage Ranch.

To get a feel for the size of the home, you could stick almost four full homes in a McMansion from the original Shasta Park neighborhood from the late 1960s south of Alameda Street where you’ll find an abundance of 1,100-square-foot homes

Critics panned the McMasnions as nothing but oversized boxes with little architectural relief. Buyers, though, typically went on an improvement splurge after moving in employing exterior two-tone paint and creative driveway and yard designs to detract from the boxy look.

Inside, some versions had two master suites including one that was an in-law or second family suite with its own living area and kitchenette behind double doors on the second floor. Another has a master suite that covered more than half of the second floor – 1,000 square feet plus – with the bedroom area going from one end of the house to the other with a massive master bathroom  tucked over the three-car garage in space that is larger than most master bedrooms found in 1980s-era home. The master walk-in closet dwarfed bedrooms in many older homes.

The salad days of the McMansion are over. They no longer command $172 per square foot. One McMansion at 1952 Nehemiah sold in November of 2008 for $330,000. That’s $76.10 per square foot. It represents a 55 percent plunge in market value in just over three years.

The pain of the loss in McMansion values – and that of all homes in Manteca – isn’t being felt just by the buyers who were foreclosed on or the banks unlucky enough to buy the mortgage on the secondary market.

The city’s take of property tax is plunging as well. When the McMansions were selling for $750,000 the owners were paying property taxes of $7,500 a year with 11 percent or $825 going to the City of Manteca. The McMansion sale in November translates into $3,300 a year in taxes with Manteca’s general fund cut dropping to $363 or by 55 percent. It’s a figure made even more sobering by the fact Manteca spends $1,790 providing city services for a typical household of three. The property taxes before fell almost $1,000 short of covering the cost. The city depends upon sales tax and other receipts to cover the difference. Consumer confidence, though, has eroded and the buying being fueled by folks who used their homes as ATMs is over. Ironically, many of the homes going into foreclosure were the result of tapping excessively into equity lines of credit.

McMansion prices are still dropping
While there are a sign the lower end of the market may be leveling out that is not the case with McMansions.

There are several reasons. The $150,000 price point is what triggered the buying activity that allowed 1,165 resale homes to sell within Manteca’s city limits last year. The farther away you get from that, the less buyer interest. The reason is simple economics. The less expensive a home, the more people who can afford to buy the home.

Real estate agents have indicated McMansions today have two things going against them that were not a factor in the decision of qualified buyers four years ago – the annual cost of upkeep such as monthly PG&E bills in terms of time and money.  

The McMansions also offer another insight in today’s market – sellers who appear to be on different planets.

Feeding the price fall is the fact the banks that own the homes being repossessed appear sometimes to be gauging the Manteca market on false terms. Just as when they wouldn’t budge on asking top dollar for a foreclosed home 15 months ago, some banks now seem to be hell-bent on trying to dispose of the McMansions at any cost.

“It has everything to do with what is motivating the seller,” noted Realtor Tom Wilson.

Wilson said some banks may be basing their decision on outside factors such as the recent Forbes magazine article that declared the Stockton-Modesto Metropolitan Statistical Area – of which Manteca is smack dab in the middle – as the worst place to live in the country based on the foreclosures.

Wilson believes that is an abnormality that overlooks other key economic signs such as growth patterns.

Two of the McMansions sold in November of 2008 – one for $437,000 at 1926 Apollo Court and the other for $330,000 at 1952 Nehemiah – underscore Wilson’s point that the sellers (in this case the banks) are driven by different circumstances.

There is no way that a $137,000 difference would normally be justified in two homes essentially the same closing escrow just weeks apart although the higher priced home has one less bedroom and is located on a court.

Comparing McMansions to 850 square foot home selling in 2005
The real question is how low can the McMansions go?

They are already falling deeper than comparable homes built at the same time south of the Highway 120 Bypass that push 4,000 square feet and fetching as much as $30 more per square foot in today’s market.

An answer to that question might be found at 635 Micheletos Way where a seven bedroom, four bathroom McMansion adjacent to the Cowell campus has an asking price of $314,500.

To put that in perspective, a home on Goodale Court sandwiched on a narrow street a stone’s throw from the railroad tracks and sandwiched between Center Street and Yosemite Avenue sold for $310,000 in February of 2005. It has no garage. The lot the Goodale Court home sits on – 3,458 square feet – is smaller than the 4,336 square foot McMansion itself.

That home sold for a staggering $364.70 per square foot back at the market’s peak. It sold last year for less than $150,000 or $176.40 per square foot. That is $4 more per square foot than the highest price ever paid for a Manteca McMansion which was $750,000.

If the McMansion does sell for $314,900 it will come in at $72.53 per square foot or $104 less than the Goodale Court home. The reason is simple. More people can afford homes such as on Goodale Court so they fetch much stronger prices.

Wilson made an observation that will probably seem prophetic by the middle of the next decade.

“I firmly believe the Manteca market is extremely undervalued right now,” Wilson said. “The prices will eventually go back up…. That’s why the smart money is buying now. It is my opinion that you won’t see this (level of affordability) again.”

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