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Banker: Opportunity of a lifetime

It costs less to buy resale than to build new home

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Banker: Opportunity of a lifetime

It now costs less to buy the majority of resale homes in Manteca than it would cost to build them.

HIME ROMERO/The Bulletin

POSTED February 22, 2009 5:25 a.m.
Atherton Homes is building a 1,572 square foot home with three bedrooms and two bathrooms at 1013 Barbados Street for $124,258.

That reflects the cost of the foundation, the walls, the roof and everything in between them. It excludes the $60,000 plus needed to connect to the water and sewer systems, pay school mitigation fees, and cover the cost of growth fees ranging from park facilities to major roads. That brings the cost of the home to over $185,000 but still does not include land costs, major infrastructure such as subdivision streets, lights, sewer, water, and storm lines, plus developer costs and profit.

A three-bedroom, two bathroom resale home at 1457 Ridgecrest Drive with 1,510 square feet closed escrow Feb. 4 for $130,000. That is $55,000 less than the Barbados Street home’s construction only costs plus required fees.

There have been 131 resale homes that have closed escrow in the first seven weeks of 2009 in Manteca with a median selling price of $179,900. The vast majority of those homes are selling for less than it would cost to construct and pay required fees on a new home.

It is a trend throughout California that Wells Fargo Bank Chief Executive officer John Stumpf noted Friday has created the opportunity of a lifetime in the Golden State with homes selling for less than it would cost to build them new. He also told the San Francisco Chamber of Commerce that the situation is made sweeter with the lowest mortgage rates since before 1960 making affordability unparalleled since the end of World War II.

It is the second indicator that much of the Manteca resale housing market is in bottom territory. Most homes selling cost less per month to buy with a 3.5 percent down, 30-year fixed FHA loan than it does to rent them each month.

A prime example can be found on Edward Avenue in the Powers Tract neighborhood sandwiched between Manteca High and Spreckels Park.

A 1,094-square-foot home at 431 Edward Avenue with three bedrooms and a bathroom closed escrow for $70,000 on Feb. 10. If the buyer used a 3.5 percent down fixed 30-year rate FHA loan, the monthly cost including taxes and insurance of owning that home is $480.79. A classified ad in the Manteca Bulletin last Sunday for a kissing cousin of that home on the same street with three bedrooms and one bathroom has a rent of $1,080.

That’s more than double or $600 more to rent than to buy each month. Buying also comes with tax advantages that renting doesn’t.

The home that sold may not have central heat and air but those qualifying for FHA loans can get a fix-it loan for structural issues such as a new roof, dual-pane windows and such as well as heating and cooling system up to $15,000 at the time the home closes escrow.

If the buyer did that they’d get energy efficiency plus new heat and air and have a payment that comes to $565.95 or just over of what it costs to rent.

All but four of the 131 homes that have sold since the start of the year in Manteca qualify for FHA loans. That is the exact opposite of four years ago.

FHA loans are designed to help make housing purchase possible for people with fairly good credit but minimum down payment.

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