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New home sales aren’t driving down home prices

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New home sales aren’t driving down home prices

A new home goes up at Florsheim Homes' Valley Blossom in southwest Manteca.

HIME ROMERO/The Bulletin


POSTED November 5, 2010 3:00 a.m.
It is one of the enduring myths of the housing bubble bust: New home construction is driving down the price of resales in Manteca.

If anything, the exact opposite is true.

New home construction did not start picking up to the level of 304 new homes built in Manteca in 2009 until prices dropped low enough for new homes to compete with foreclosures. During 2008, the typical prospective buyer passing through model homes were aggressively comparing foreclosure prices - plus the price of work that had to be done - to a new home and came to the conclusion more often than not that they’d be money ahead with a foreclosure.

It forced builders to sharpen their pencils and find places to cut costs ranging from smaller homes to minimizing upgrades.

Now with 2010 closing in on another 300 new homes being built and sold in Manteca - a pace, by the way, that leads every other jurisdiction in the Northern San Joaquin Valley - the dynamics have changed somewhat.

Almost every new home buyer - according to hew home sales staff - has not seriously entertained the resale market. They are positioned financially to take advantage of the market to buy new.

Also new home buyers are exclusively buying to live in and aren’t investors these days. Those factors are making new homes a different animal than it was in the boom days of the housing growth spurt when new home prices accelerated pulling resale prices upward as well.

Now the exact opposite has happened.
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