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Manteca apartment rents going up

2-bedroom, 1 bathroom units are up $45 a month

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Manteca apartment rents going up

The monthly rent for a typical two-bedroom apartment in Manteca

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POSTED January 18, 2009 1:04 a.m.
House rents are dropping slightly in Manteca but not apartment rents.

The Manteca Bulletin’s annual survey of seven complexes representing more than 700 of the city’s 3,421 apartment units shows vacancy rates are down slightly and demand is climbing particularly in the one- and two-bedroom offerings.

One-bedroom units in three of the complexes are up $10 to $30 a month with two unchanged. The biggest demand is for two bedrooms and one-bathroom apartments. All complexes are up an average of $45 a month with the biggest jump being $90 a month.

A glut of available rental housing has driven down the monthly prices the most popular type of homes — three bedrooms, two bathrooms with 1,600 to 1,800 square feet in solid neighborhoods can command. Two years ago, they were pushing $1,600 a month. Now they are between $1,350 and $1,400 a month.

It is wrong to assume that the single-family housing rental market being soft would mean apartment demand would therefore be soft as well. Like everything, rentals are price and market driven. There is a difference between paying $800 to $900  per month for the most popular apartment option in Manteca — two bedrooms and one bathroom — than it is for the most popular rental housing of three bedrooms and two bathrooms at $1,350 to $1,400 a month. Most apartment complexes toss in monthly municipal utilities, which would cost about $80 or so if you were renting a house.

Even with the economic slowdown, there isn’t a lot of available rental housing under $1,000 in Manteca except apartments. There hasn’t been a new apartment complex built since 2005 and those were luxury apartments of which none rent for under $1,000 today. It has been 15 years since mid-range apartments or any other complex of consequence has been constructed in Manteca.

And unless more sub-$1,000 apartments are built in Manteca the upward pressure will continue on apartment prices. The reason why rents were stagnant initially then dropped from 2004 to 2007 had everything to do with liar loans where people with $30,000 household incomes. Those who may have had a tough time renting an upper end apartment were able to buy $350,000 plus homes. Once the liar loans ended and the foreclosures started, rents have been inching upward again.

The next biggest factor after cost is lifestyle.

That explains why Paseo Apartments — which registered their first jumps in rent since opening in 2005 — is able to command $1,495 for a three bedroom, two bathroom apartment or in excess of $100 more than the comparable rental house with a comparable floor plan rest for in Manteca.

Paseo, which is used to having a waiting list, has had a slight up tick in vacancies created ironically by long-time renters who decided it made more sense to buy than rent even if it changed their lifestyle.

That is why they are offering $205 off per month during January for those who sign a year lease for the three bedrooms, and two-bathroom apartment unit. They are also tossing in February for free if you move in this month with a 12-month lease. They are offering similar lease discounts for third floor apartments.

Drop in home prices lure
upper end apartment renters
to home ownership
The reason those who may have been happy renting an apartment are now buying is simple. It is now cheaper month-to-month to buy a middle-price home in popular Manteca neighborhoods than it is to rent in the same area.

You can rent a home on Woodside Way near Joshua Cowell School, in Chadwick Square near McParland School as well as in Springtime Estates in the triangle bounded by Louise Avenue, Highway 99, and SaveMart-Longs for $1,400 a month. Or you could pay less per month to buy similar homes in the same area with a 3.5 percent down FHA loan.

For months, you’ve been able to buy homes in pre-1980s neighborhoods for less than it cost to rent them. Now it’s possible to do it even in 1990s neighborhoods and — in some cases — areas built in the last eight years.

“People who are in a position to buy but who don’t are going to be looking back in two or three years from now and be kicking themselves,” noted Deborah Romero of Ability Mortgage last month

Romero ran some number on two homes that closed escrow in mid-November — 1045 Mission Ridge Drive that sold for $175,000 and 436 Lancaster Drive that sold for $170,000.

The Mission Ridge Drive home has 1,665 square feet with three bedrooms and with two bathrooms. The Lancaster Drive home has 1,668 square feet with three bedrooms and two bathrooms.

Romero calculated buy-to-own loans through FHA at 6 percent for 30 years, even though today’s rate is 5.5 percent. She also used a 3.5 percent down even though the FHA has allowed 3 percent down to continue until Dec. 31 before bumping it up.

Mission Ridge Drive — including mortgage insurance, taxes and homeowners insurance — comes to $1,340 a month to own. The Lancaster Drive home comes to $1,310.

Postings in the Manteca Bulletin of homes in those neighborhoods of similar size plus a spot check with landlords shows the going rate to rent such homes is $1,400. At least one landlord acknowledged prices are down — they used to command $1,600 — because of a surplus of rental homes. He noted that once the supply tightens up, he expects rents to go up.

So out of the gate, you’re saving money by buying over renting. Toss in tax consequences and purchasing becomes a no-brainer unless, of course, you plan to move out of the area in the next two to three years.

Long-time mortgage lenders and real estate agents in Manteca are telling clients if you can afford to buy a house, you need to do it now before things change. They expect the market to start eroding in terms of affordability after 2009.

Manteca housing inventory is continuing to drop from a record 651 existing homes for sale in September 2007 to 399 as of Tuesday.

There were 1,165 pre-existing homes sold within Manteca’s city limits during 2008.

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