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Condos $5,000 away from 80% decline
Part of the Cherry Lane condos at Union Road and Cherry Lane. - photo by Bulletin file photo
The Cherry Lane condos are on the verge of making Manteca history.

A two-bedroom, one bathroom condo with 944 square feet closed escrow Oct. 14 for $45,000 or what used to be the price of a fully loaded Chevy Tahoe. It is just $5,000 above being exactly 80 percent lower than the peak price of $220,000 that a similar united closed escrow for 35 months ago.

By contrast, the median resale price has dropped down to $176,050 or 43% during the same time period.

The biggest reason why the bottom keeps falling out of the Cherry Lane condo market has everything to do with rentals and FHA loans.

There are too many rentals in the complex which makes it ineligible for FHA loans that are driving the first-time buyers market.

As for investors the lure of three bedroom and two bathroom homes that are at rock bottom prices and have solid rental return potential are just too good to pass up.

Having said that, someone putting 20 percent down to secure a conventional loan could get into a Cherry Lane condo – homeowners association fee, insurance, and taxes included – for less than $450 a month on a 30-year fixed rate loan.

Try to find an apartment that is decent with two bedrooms that rents for that amount in Manteca. It even makes sense for an investor in terms of cash flow.

So does this mean everything else is going into the proverbial toilet as well?

In one word: “no.”

Unlike four years ago when everything was going up proportionately, the Manteca housing market actually has a number of niche markets that are all over the place in terms of whether they are going down, holding their own, or are doing a slight seesaw effect.

Standard three bedroom, two bathroom homes that aren’t leaning heavily toward tear down status seem to be holding their own with the ones in near mint condition actually experiencing a slight increase in value compared to four months ago. The reason is simple. They are the most desirable floor plan for buyers and renters alike. The fact they are in the heaviest demand for renting makes them a favorite target of investors who are all cash buyers which effectively squeezes out the buy-to-live-in crowd.

The McMansions – and large custom homes - have slowed down their depreciation drop. Prices – depending upon who you’ve talked to — are either about to hit bottom or will drop even more.

The extension of the $8,000 tax credit to April 30, 2010 is expected to shore up – at least for the short term – the three bedroom and two bathroom market.

It also offers an opportunity for those people willing to leap on “irregulars’ or less popular floor plans such as two bedrooms with two or one bath or a three bedroom with one bath.

They aren’t easy to secure renters for unless the market is on fire.

Now toss in the fact there are more foreclosures coming and that most market observors believe that it will be the last big bundle before they start dropping off. What will that do to prices?

If luck holds, the $8,000 tax credit and low interest rates will get the South County to mid-spring. If demand is still strong – prices are great for buyers even without tax credits – there could be the real start to a long-term recovery.

That isn’t the prognosis elsewhere as experts are saying mid-2011 for most of the nation.  There is a silver lining for being in the Northern San Joaquin Valley and that’s fact this is where the liar loans started popping up first thanks to sky high prices that made a typical home sell for 7.5 times the median household income. Affordability is now at about 2.5 times the median income.

Since we got into the mess first we will be among the first out.

It backs up conclusions of a small but growing number of Realtors who believe Manteca is at the bottom of the market. It’s reflected in the median selling price of $175,000 to $179,900 that the typical resale home closing in escrow has been bouncing between since April after dropping an average of $4,000 a month for the previous 10 months and $10,000 a month during the 12-month period before that.

What needs to happen now is for the foreclosures to be completely absorbed. Then it would open the floodgate to owner occupied homes that owners have been holding back on.

If all goes according to plan, 2010 will be flat with minimal price declines.

However, don’t rule out Cherry Lane condos from dropping even further.