If the gains of the past 12 months in housing prices throughout the 209 region occurred prior to 2006, there would be dancing in the streets.
The median price for closed escrows of previously owned homes have jumped from the lower end of 11.6 percent in Turlock to a region-leading 40.1 percent in Manteca during the past year.
Prices still have a way to go before they reach the historic peak of 2005.
For Manteca, that was $429,000. That is a $173,000 gap that still has to be covered given the median price of homes that have sold in Manteca is at $256,000. That’s up 40.1 percent from the year’s prior median of $184,500.
It’s a given that most houses are still selling below replacement value in terms of construction, development fees and land costs. But the factors that are driving the current surge besides a rebounding economy is low inventory and growing demand.
Manteca, as an example, had four consecutive years from 2008 to 2011 of more than 1,050 existing homes changing hands. That included years when many people still feared the economy was heading to the bottom of the Mariana Trench.
Nearly 1,000 of those homes each year were foreclosures. Depending upon the real estate tracking firm and how they pinpoint foreclosures, Manteca is on pace to end the current year with between 550 and 650 foreclosures to be turned over on the market.
And instead of having 180 to 300 homes available for sale, there are only 90 as of last week.
Then there is the Bay Area effect.
Demand is much stronger on the west side of the Altamont Pass. It had created a situation where new home builders are getting offers that are above their asking price.
It is just a matter of time before rising prices in the Bay Area start putting such a squeeze on potential buyers that the buyers trickling over the Altamont Pass will turn into a steady stream.
Once that happens prices will start closing in on 2006 levels.
You might find that counter to the conventional wisdom that argues prices will never return to the 2006 levels. But that really is referring to deals being made that outstrip the ability of buyers to meet their mortgage obligations. Simply put, it is highly unlikely a situation will be repeated where the housing market is driven into hyper drive by putting people into homes carrying unrealistic loans. It doesn’t mean there won’t be innovative ways to finance homes. For example, no one in 1960 ever envisioned the hot selling tool in Orange County in the go-go days of the 1970s that basically sold people new homes while they leased the land beneath them.
Prices will return to 2006 levels and then some. Of course, part of that will be inflation driven.
If you doubt that, recall what was being said in 1992 after prices reached a median $135,900 a year prior in Manteca. That was nosebleed territories for homes. People said they’d never see homes that high again. It was the first post World War II recession that hit California hard as it happened just as much of the military and private sector defense contractor jobs were being eliminated in the Golden State.
The market hit bottom at $125,000 and stayed below $135,000 until 1999.
Fifteen years after naysayers said the market would never again reach $135,900 for housing it was at a record $429,000.
The odds are instead of coming up with funny loans the next solution to wallet busting home prices might be through smaller homes, higher densities, or innovative multi-family housing configurations.
Prices will again reach 2006 levels.
The question is when.
To contact Dennis Wyatt, e-mail email@example.com