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Foreclosures are good thing in long run for Manteca

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POSTED May 23, 2009 2:27 a.m.
Good times are coming to Manteca.

And we owe it all to the collapse of the housing market.

That may sound completely nuts with Manteca unemployment at 13.8 percent while schools are being rocked with funding cuts and declines in sales and property taxes are delivering a one-two punch to the city.

Good times, though, are coming. It won’t be the go-go days of the 1990s and early part of this decade. Instead, it is going to be good, solid economic growth not based on speculation but what comes from people putting down roots.

There have been 1,637 existing homes sold in Manteca since Jan. 1, 2008.

The vast majority of people buying the homes work here and live in the valley.

Prices have gone so low that they are either in homes with mortgages that are hundreds of dollars less than their rent was or the mortgage is virtually the same as what they were renting for before factoring in tax advantages of home ownership.

They aren’t going out and going to the max when buying. If they’re qualified for a $200,000 loan, they want something around $120,000. They may end up paying more than that but they have no appetite to become house rich and money poor.

It is true they aren’t using home equity loans to go on buying sprees or to put in new swimming pools. What is happening, though, is the stabilizing or reduction of their monthly housing costs is freeing up income that then becomes discretionary. They’re not going on a spending frenzy but they are spending.

And as the years go by given how they have stabilized their housing cost they will have more money to spend especially if most stay put as they have indicate they plan to do.

Not jumping from house to house isn’t an aberration. It was the norm until the 1980s and ballooned into a fever pitch in the 1990s.

There was a time in the late 1990s before ACE Hardware closed in downtown that a friend was amazed that a long-time employee who wasn’t making big money compared to Bay Area salaries could afford to own a home as well as have an RV. On top of that his wife over the years had only worked part-time on occasions while raising children.

The answer is actually simple. They never developed new house lust. When they were younger, they bought a home that was s struggle for them at the time.  That monthly payment – which was around $300 – represented about a third of their household income. As the years went by, pay raises provided more and more cushion while the No. 1 cost in a typical American’s budget – housing – remained constant.

Buyers today have a distinct advantage. The prices they are paying for monthly mortgages that include property taxes and insurance is either equal to or less than what they are paying in rent. That wasn’t the case when the store clerk bought. In fact, the situation today is indeed a once in a lifetime opportunity in terms of housing prices to income in terms of affordability. It gets been better if the buyers stay put for 10, 20 or 30 more years.

House jumpers – before the advent of liar loans – would simply keep buying up as they earned more money essentially trading a lower payment for a higher payment that wiped out any gains they had from pay increases. That’s oversimplifying it a bit but you get the drift. Then along came the concept that your home is an ATM where you simply pay it back if you ran short on cash by selling and buying anew.

Housing prices – perhaps five years from now – will probably start climbing again as they always do. Consider the impact, though, if a large segment of the community that could once afford nothing more than rent are homeowners when the up escalator starts again. They will not be getting hit with rising rents.

You will have newcomers with bigger pay checks – mostly likely from the Bay Area- as well as settled residents who have a large income to spend than they did when they rented.

Those two types of homeowners in combination with each other will provide an attractive base for securing retailers that in turn will strengthen the Manteca economy.

It will bring about the best growth of all – steady – that will in turn provide opportunities for those on the bottom of the income spectrum to jump aboard.

That doesn’t happen when you have an overheated economy where rapidly rising housing prices trigger other upward price pressures hurting the folks at the bottom of the economic chain.

Say what you want about the foreclosure mess, but when it works through the system as well as its toxic aftershocks dissipate it will have been the best thing to happen to Manteca economically in a long, long time.
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