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The new reality
Home values dropping 14.7 percent during Manteca was 2008 is a good thing in the overall scheme of things. - photo by HIME ROMERO
There are those who are still in denial that their homes are no longer the equivalent of a Bureau of Engraving printing press.

If the recent reassessment of 155,000 homes countywide by San Joaquin County assessor Ken Blakemore’s office doesn’t convince them the party is over, nothing will. Countywide, property value dropped 10.7 percent or by some $6 billion. The drop in Manteca was 14.7 percent or $500 million.

This is a bad thing, right? Well, if you are the government counting on property tax dollars or someone who believes a house isn’t a home but an investment that should have pie-in-the-sky returns like Bernie Madoff’s investment schemes it is a bad thing. If you are someone who believes moderation works best and that it makes sense to have affordable shelter, it is a good thing.

The plunge in housing prices is actually the start of a long overdue market correction. The rest of that correction is hopefully a return to a long extended period of time where housing prices simply keep pace – or a little bit better – than inflation. Such an atmosphere encourages stable spending and stable investments. It flattens the cost of living somewhat and gives those struggling to get on board the American Dream a chance to do so. It is easier to scale Mt. Diablo than it is Mt. Everest when it comes to housing appreciation and trying to buy or rent something you can afford.

$87,900 drop in value in 9 months
I can make an even stronger case now that the reassessment has come through that I had no problem buying in the early part of the market’s decline.

The previous county assessment on the 980-square-foot, two bedrooms, one bathroom home I bought was $225,000. I paid $189,900 in March 2008 for the home in the Powers Tract neighborhood that is sandwiched between Manteca High and Spreckels Park.

The latest reassessment puts the market value at $102,000 as of Jan. 1, 2009 after just nine months after signing the mortgage.

And given the way prices have slipped since the start of the year, the odds are great I’ll be in line for another downward readjustment when the next assessment snapshot is taken on Jan 1, 2010. Based on escrow closings since January in my neighborhood where three bedrooms and two bathroom homes are selling for under $100,000, I could end up with another $20,000 plus drop in property value next year.

As an added note, I have no problem with neighbors who have paid off their homes after 30 years and whose tax bills are still considerably lower than mine. I hope to have the same protection under Proposition 13 when I’m in retirement and have a fixed income.

One may look at the figures and say that I paid too much or that I’m upside down and should walk away from it. Such sentiments are 100 percent wrong.

First, did I pay too much? I’m not going to say that I wouldn’t have been happier if I could have slashed close to $400 off my basic mortgage payment. I hear the horror stories, though, that are going around from people trying to buy a home in today’s market who are FHA buyers like I was.

I had the luxury 17 months ago of taking my time – although I made a quick decision once I stepped over the threshold and instantly knew it was right fit. I got the house I wanted. I got the neighborhood I wanted. I was able to get my loan approved in 48 hours. I got $5,000 kicked back for closing costs plus the bank upgraded the kitchen and bathroom. I was able to secure in advance a personal bank loan to replace the roof, put in a new fence, and make other cosmetic improvements. And I was able to do it knowing I could afford it as long as I practiced discipline and moderation. As an added plus, I got money back from the IRS for the first time in years instead of sending them and the state an extra $2,000 to $3,000 on April 15 although California did get $70 more from me in income taxes despite buying the house.

The reassessment means I will end up having $1,050 less a year in housing expenses as that is how far my property tax liability is dropping.

Seasoned real estate pros that have seen it all – Tom Wilson and Carol Bragan – have two points they like to tell their clients that are similar but somewhat different. The right time to buy a home, as Wilson will tell you, is when it is right for you and you can afford it. Bragan simply notes people who don’t look in the rear view mirror when they know they can manage OK with what they have never get into the “could’ve, should’ve game” that will drive you crazy.

I have no regrets and I am comfortable.

For those who advocate walking away from a house that is upside down, keep spreading that point of view and maybe you’ll wake up one day and find no one will lend the working class or the middle class money.

A house is a home first and foremost
The second you drive your car off the lot, you are upside down. Do you walk away from that loan? No. An obligation is an obligation. If everyone practiced a philosophy is was OK to renege on a debt even though you can handle it by making prudent choices with the rest of your spending, nobody would be lending you money for much of anything.

My insurance company has estimated the replacement cost of the house and the free-standing garage would be $187,000 at today’s construction prices. That should reinforce that the market is unrealistically undervalued. It means that prices will bounce back to real worth. Not tomorrow, not next year, but in the course of several years.

With a little luck they won’t overheat again. If this mess has taught is one thing it is moderation – in terms of how we live, how we spend and, yes, in what we expect on return for our money – should rule the day.

People who lived through the Great Depression never forgot the lessons they learned. While this isn’t anywhere near the suffering of that time period, it should hammer home a lesson for many of us for years to come.

The new reality is simple. A house is a home first and foremost whether you own or rent. To view it as anything else is ludicrous.