Manteca’s average closed escrow on a resale home has declined 57 percent since 2007.
No big news there.
In year-to-year numbers for February, March and April, prices have inched up ever so slightly on all existing homes sold in Manteca by 0.6 percent to $170,000 from $169,000 based on statistics gleaned from Trulia and RealtyTrac.
That’s partially good news.
The biggest gains in closed deals in terms of prices are two-bedroom homes. The median closed price is up 12.8 percent over last year going from $88,000 to $99,250. At the same time three-bedroom homes declined 1.4 percent dropping to $140,000 from $142,000 while four-bedroom homes slipped 2.4 percent from $190,000 to $185,500.
This is par for the course at the start of a recovery. Smaller homes - read that most standard two-bedroom homes - are the least expensive on the market. More buyers can qualify to buy them so they are chased harder when there is an increase in demand.
Why this is good news is underscored by the fact investors aren’t flocking to buy two-bedroom homes for the simple fact they aren’t that easy to rent. Most of the buyers tend to be those who are planning to use them as their home.
With the median price of three-bedroom homes at $140,000, it is easy to get a positive cash flow even after making improvements. That’s because the rents for three-bedroom houses are pushing an average of $1,300 to $1,400 a month.
Even more telling of the market’s move toward recovery is the average price per square foot for February, March, and April for houses that closed this year in Manteca was $99. That’s up 3.1 percent from last year.
That is not just the function of smaller homes increasing in value but the McMansions gaining some of their value back. McMansions defined as homes 4,000 square feet or more, in some instances dropped by almost two thirds in value from the market peak.
Investors can see a true market recovery down the road. Several real estate agents said they represent clients who are going for a win-win. They will be happy having a positive cash flow renting homes but they are waiting for when homes bounce back to at least replacement value and beyond to sell them to others.
If anything, that is what will power the initial “true” housing recovery. Some economists estimate homes in key California markets are as much as 20 percent under value. A sustained, steady but not a gang buster economic recovery would push homes back to what it would cost to replace them. If the market got superheated - which no one expects in the foreseeable future - it would go significantly beyond that point.
A 20 percent gain assuming that is what the average home is selling for below the actual replacement cost in Manteca - would bring median prices up by $34,000.