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2009: Ultimate year for housing affordability?

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2009: Ultimate year for housing affordability?

This 1,587-square-foot home with three bedrooms and two bathrooms at 303 Vine Street is available for $50,000.

Bulletin file photo/


POSTED January 7, 2009 12:11 a.m.

Tom Wilson bought his first house in 1971

He was making $4.50 an hour. The down payment of just under $2,000 included closing costs for the 1,400-square-foot three-bedroom two-bathroom home he bought in Livermore as a 19-year-old for $27,900. The down payment came from after school jobs and paper route money he had saved. His parents did help by co-signing on the loan.

The monthly mortgage payment on the FHA loan at 8.5 percent was $249 and included taxes and insurance. That compared to $188 a month he was paying in rent.

Fast-forward 38 years.

You can buy the same size home in Manteca for $150,000 or less. The 3.5 percent FHA down payment requirement means you have to come up with $5,250 at closing. The interest rate — which is at 5.25 percent — translates into a monthly payment for a $150,000 home of $978 a month including property taxes and insurance. To rent that same house today in Manteca, based on classified ads in the Manteca Bulletin and a survey of several property managers, you’d be paying $1,050 to $1,200 a month.

“Back then it was a wise move to buy because you could purchase a home for just a little more than you could rent,” Wilson said. “Today, you can buy a home for the same or even less than what you’re paying in rent.”

Wilson — along with a number of other long-time real estate agents and even mortgage brokers such as Marge Imfeld — see 2009 as a year where affordability for housing will reach its zenith in Manteca for the first time since long-distance commutes in the early 1970s started transforming the Northern San Joaquin Valley into a bedroom region for high paying Bay Area jobholders.

First-time buyers have time to save

“It’s a lot more work qualifying for a loan and you have to have the 3.5 percent down,” said Imfeld of Ability Mortgage.

Imfeld believes first-time buyers who lack the saved money and don’t have parents to help them with upfront costs or don’t have a 401K they can borrow against, have the luxury of sitting down with a loan broker and address what they need to do in terms of changing spending and saving habits to come up with the money needed to become a home owner before the year ends. But, as she noted, those with the need to accumulate money for the down payment costs for a FHA loan of 3.5 percent — that translates to $3,500 on every $100,000 borrowed — need to get moving now.

“A good broker can come up with ways to cover the closing costs,” Imfeld said.

Playing into the hands of those who want to become first time buyers are mortgage rates at their lowest point in 30 to 40 years plus a second wave of foreclosures expected to hit mid-year. That means those who need to either change their spending and saving habits or else repair credit will have time to do so before affordability starts slipping ever so slowly later this year or in 2010. It is expected to be a repeat of 1993 when prices hit bottom after the last drop in Manteca. It was followed by four years of slight price increases that slowly reduced the number or households that could afford to buy in Manteca before skyrocketing prices in 1998 to the point there were virtually no local first-time buyers as the housing market was completely dominated by those coming from west of the Altamont Pass.

A second wave of foreclosures is expected to hit Manteca-Ripon-Lathrop by mid-2009.

The current foreclosure wave that is slowing down somewhat in terms of intensity was spurred primarily by what have been called liar loans — where applicants’ true income was significantly inflated — as well as zero interest loans for the initial two to three years.

”We’re seeing a drop off in foreclosures right now,” noted Marge Imfeld of Ability Mortgage who has more than 25 years of mortgage lending and real estate experience in the South County area.

The next wave of foreclosures that are anticipated to hit the market primarily are those with lower initial rates for several years that are then adjusted upward. Imfeld and others believe that more of those loans where the borrowers have an income could support re-financing at lower rates — will be able to be salvaged by the banks.

Many first-time buyers are forsaking the “got-to-have-it-all” syndrome that Wilson says is key to taking advantage of the market’s unique affordability when you aren’t flush with income.

More looking toward mortgage burning party

“The three key phrases today in real estate driving people when they buy are ‘location, location, and mortgage burning party’,” Wilson said.

Wilson said the physical location of a home as well as neighbors are critical but more and more buyers are intentionally buying properties that they can afford ultimately to own and maintain without crippling their ability to cover other expenses.

Wilson often shares the story of buying his first home with buyers he’s worked with over the years.

In the past, they mostly smiled and chuckled.

Now, he said, more and more buyers are seeing the value of delayed gratification as a way to live within their means.

Besides working toward saving for their first house, it also means they aren’t buying more home than they can afford to handle.

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