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The days of rock-bottom affordability are gone

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POSTED December 21, 2012 12:39 a.m.

It’s a mad, mad, mad, mad housing market.

The median price of existing homes sold in Manteca during November was $226,450. That’s up $42,300 or 23 percent in the last 14 months based on Trulia statistics.

There are 564 homes in the two Manteca ZIP codes somewhere in the foreclosure process. That means they are in pre-foreclosure, at auction or bank-owned.

At the same time inventory has dropped down to 113 homes.

Who would ever have thought four years ago you could have almost 600 homes or roughly 3 percent of Manteca’s housing stock in foreclosure and still have a drop in inventory coupled with a strong double-digit surge in the price of homes closing escrow?

Meanwhile, new housing starts in Manteca are still chugging along near the 300-mark annually.

Part of that rebound in pricing has to do with how substantially undervalued the housing market has been for the past five years.

If it costs $220,000 to build a typical 2,400-square-foot home before upgrades and profit margins are factored into the equation. That’s on top of land development and acquisition costs as well as construction, growth fee and utility connection expenses. Manteca’s existing homes - for the most part - are still being sold below replacement costs.

That is particularly true of homes around Woodward Park, where similar floor plans and construction shows existing homes are still lagging significantly behind new homes.

This, of course, is good news for homeowners who are seeing equity restored slowly but surely. It still means that a healthy chunk of Manteca homeowners are underwater in terms of the market value of what they own compared to what is owed on their mortgages. That, however, will eventually go away for virtually all homes.

It is bad news for those potential buyers who have been waiting for prices to drop further or for interest rates to drop again.

Prices obviously aren’t on a downward swing any longer. While that doesn’t mean a return to the pre-2006 market, it does signal that the pendulum has swung back to upward pressure on prices.

By waiting, such buyers are now able to afford less housing for their dollar.

A one percent hike in the mortgage rate for every $100,000 borrowed increases monthly payments by $56.

Every $10,000 increase in principal - without interest factored into the repayment equation - costs $28 more a month.

Interest rates are essentially flat in year-to-year comparisons

The $42,300 increase in the median price, though, means monthly payments for buyers of a typical existing home in Manteca have gone up $100 a month over the past year.

Homes are still affordable by historical standards but the days of rock bottom affordability are gone.

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