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Home deals of the century

Manteca homes selling for less than $500 a month

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Home deals of the century

This home at 657 Pine Street closed escrow for $75,000 on Feb. 12 at a price that with a 3.5 percent down FHA loan would have cost $513.34 a month – including taxes and insurance – or $...


POSTED February 19, 2009 5:02 a.m.
California Classics – a well-kept neighborhood built off East Louise Avenue east of Cottage Way – has homes now selling for a few thousand dollars over what they sold for new nearly 15 years ago.

One such home at 1918 Pin Oak with four bedrooms and two bathrooms closed escrow in January for $199,000.

Over in the 1950s era Powers Tract neighborhood sandwiched between Manteca High and Spreckels Park a 1,094-square-foot home at 431 Edward Avenue with 1,094 square feet featuring three bedrooms and a bathroom sold for $70,000 Feb. 10. If the buyers used a 3.5 percent down fixed 30-year fixed rate FHA loan, the monthly cost including taxes and insurance of owning that home is $480.79. A classified ads in the Manteca Bulletin on Sunday had two three-bedroom and one-bathroom homes for rent for up to $1,125 a month including one on Edward Avenue that is renting for $1,080 a month. That’s $600 more per month to rent than to buy a similar home.

“I don’t think we’ve ever seen prices like this before,” noted Carol Bragan of Bragan Realty.

Bragan makes a point that many are missing when it comes to Manteca housing. Yes, prices on some homes were this low 15 years ago but that was at 1994 income levels. Even in today’s economy with those working facing a year without raises the typical household has significantly more house buying financial muscle than they did in the mid-1990s.

It’s a level of affordability that is unprecedented in Manteca in at least 30 years.

University of the Pacific economist Jeffrey Michael noted in early 2008 that San Joaquin County housing prices have been out of whack for years due to demands of a commuting population heading east over the Altamont from high paying Bay Area jobs to find affordable housing. The result was upward pressure on housing prices that made them unaffordable for most that worked and lived in San Joaquin County.

At the market’s peak, housing prices countrywide were almost 7.5 times the annual household income. Affordable housing is defined as prices that are not more than 2.5 times a typical household’s income.

Affordability improves drastically in Manteca
In Manteca, prices peaked in 2006 when the median hit $443,000 or 7.1 times the city’s household median income of $62,000. Today’s median selling price so far in 2009 is $179,900 or 2.9 times the median household income.

The result has been an avalanche of Manteca buyers and investors dominating the market. Four years ago, local buyers were rare birds when it came to Manteca homes.

There have been 1,296 resale homes close escrow in Manteca during the last 13 months. More than 90 percent of those homes were either foreclosures or short sales.

What is even more rare are houses now out there – typical two-bedroom, one-bathroom or three-bedroom and one-bathroom – that are in good shape that can be bought for less than it cost a month to rent than a comparable Manteca apartment.

Costs less to buy than renting an apartment
A prime example is a 792-square-foot-home with a garage not included in the square footage at 657 East Pine Street that closed escrow for $75,000 on Feb. 12. If the buyer used a 3.5 percent down 30-year fixed FHA loan their monthly mortgage payment including taxes insurance would be $513.34 a month. That is more than $380 a less month than a Laurel Glenn two bedroom apartment with roughly the same amount of square footage.

One block over on Pine Street, a similar-sized home built in the early 1950s as well sold for over $300,000 four years ago.

“Prices may drop a little more but any time that buying is less than renting you can’t lose,” Bragan said.

One drawback of waiting even though more foreclosures are coming is the ever tightening lending requirements.

Even though Bragan said people may wait for the bottom, in doing so they are setting themselves for fierce competition. The lower home prices drop, the more people can afford them and the more bidding takes place which actually forces prices back up somewhat.

A prime example was a foreclosed home on Albrecht Street south of Woodward School that Bragan’s office listed on Friday. By the end of the business day they had 11 offers and put the home on pending to stop the phone calls.

Realtor Cindy Smith of Century 21 M&M Associates added that the problem of waiting for the market to hit bottom is that you don’t know that has occurred until it has passed.

There is some evidence that prices – at least on the bottom segment of the market – have reached or are close to the proverbial bottom in Manteca.

Four weeks ago, the median closed escrow price was at $175,000 when 45 homes had sold so far this year. It has been inching up slightly each week until Feb. 17 when the median hit $179,900 with 131 homes sold.

The median will continue to creep up slightly given there are 214 pending sales with a median deal price of $181,250. This week for the first time in weeks, the median listing price is back over $200,000 with 339 properties available for a median of $200,000. 
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