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Affordability drops slightly in Manteca housing market

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Affordability drops slightly in Manteca housing market

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POSTED February 12, 2011 2:05 a.m.
Manteca is bucking the national trend ever so slightly when it comes to housing affordability.

Housing affordability did not drop in Manteca during 2010 as it did nationally. It actually went up. Economists determine housing affordability based on the ratio of annual household income to home prices.

That made Manteca’s affordability index 2.78 in 2010 when the median selling price of an existing home was $185,000.

In 2009, the affordability index was 2.68 when the median selling price of existing homes was $178,000.

Moody’s Analytics this week reported the affordability index nationally fell to 1.6. It’s been 35 years since it was that low. It was at 1.9 when the housing boom started in 2003. The “ideal” housing affordability ratio for affordability for buyers is 2.5 times the household income.

In Manteca in 2004 it was a 4.5 at the peak of the Manteca market when median prices reached 2005, housing affordability was at 6.9.

Affordability - and not price alone - is the most critical figure in terms of who can afford to buy homes. It is why in February of 2008 - four months after the Manteca inventory of unsold homes reached a record 651 - long-time renters started buying.

When the thaw started 90 percent of the buyers were “local” (defined by Manteca or Northern San Joaquin Valley) with almost all of them being renters. A month later investors started jumping on the band wagon. Overall affordability at that point had dropped to 3.3 in Manteca.

So what do all of those ratios in terms of housing affordability mean?

There is one clear message. If you are waiting for Manteca affordability to match the national market it just isn’t going to happen.

Even in the most bruising housing slump since the Great Depression, Manteca values stayed higher than the national average when compared to household income.

That is a warning sign that affordability may again be fleeting for Manteca renters.

And given the bar for affordability is almost 40 percent higher today than it is nationally also helps you understand what is fueling the investor stampede as well. It is clear that the lower end of the economic strata in Manteca has working households where affordability is a borderline issue now.

It would be wise, of course if people who need housing to be more affordable could find a way to make their move now.

There is little doubt that affordability levels will continue to erode once again in Manteca.
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