This may strike you as a bit odd given the current economic malaise but Manteca — along with Lathrop, Ripon, Tracy, and Mountain House — may become ground zero for an unprecedented housing crisis triggered by pent up demand.
Redfin and Zillow — two online platforms that deal almost exclusively in existing home sales — indicate buyer traffic is surpassing pre-pandemic levels. Zillow alone reports a 40 percent jump last month compared to May of 2019.
Some of this might be attributed to the fact it is dicey for boots on the grounds real estate companies to function at 100 percent right now. Boredom could be a small factor as well.
But if you look at the sales of new homes in Manteca and Lathrop there was barely a hiccup. Manteca, that was trending ahead of last year before the pandemic hit, is now moving along at a 40-home per month clip that puts it on par with last year. River Islands at Lathrop had a record May for new home sales. Keep in mind this is happening with unemployment soaring past 17 percent and the economy virtually shut down for two months.
But that isn’t the sign that should catch the attention of city leaders and developers. It is the emergence of a serious commitment to the “extension cord” approach to running major corporations based in the Bay Area.
Major employers from Facebook and other tech darlings populating the Bay Area to traditional workplaces such as major insurance firms and even investment banks have started down the road toward allowing a large portion of their workforces — up to 50 percent in the case of Facebook — to work from home.
Zillow’s chief economist Svenja Gudell doesn’t see that triggering a massive exodus that puts hundreds of miles between the “mother ship” of a corporation and a large share of its employees. That’s because the things that attracts such employees to cities in the first place will prompt most not to want to cut the cords entirely. Without the grind of going to the office through hellacious daily commutes, it would leave more time to savor the offerings of urban areas. It is also more likely there would be periodic interaction between “remote employees” for a wide variety of reasons anywhere from once a week or several times a month or even an extended period of on-site collaboration. That would make commuting a fairly rare occurrence.
For that reason what is likely to unfold is not cutting the cord to urban areas as much as plugging in an extension cord for both work as well as cultural, recreation, and social engagement.
Now for the wild card that could trigger the equivalent of the 1849 gold rush when it comes to large numbers of people heading east in California during a relatively short period of time.
Home ownership among people under the age of 35 is currently at 37 percent, down from a high of almost 44 percent in the past quarter of a century for the same age group based on census data. In the Bay Area home ownership levels are even lower among that age group.
It is easy to understand why.
A traditional single family home is now north of $1 million in many segments of the Bay Area.
JP Morgan economists note that significantly more millennials than Generation X members have jammed into major urban areas to work. Many are making what appears to be a small fortune. As an example, data gleaned by PayScale — a firm specializing in compensation research — shows that in 2018 the average age of a Facebook employee was 29 with the median pay over $240,000.
With prices as high as they are in the Bay Area even if a buyer had a qualifying income of $175,000 a year that would allow a maximum monthly payment of $4,083 for mortgage, insurance, and taxes as long as other monthly installment debt doesn’t exceed $1,167 they would need at least $200,000 down to qualify for a jumbo loan for a $1 million house.
To most of us on this side of the Altamont a company with a preponderance of young people making in the neighborhood of $250,000 a year who would need $200,000 upfront to buy their first home in order to live near where they work and then pay $49,000 a year — $15,400 less than the median annual Manteca household income — in mortgage payments sounds like pure fantasy. It is, however, their reality.
Toss in the fact many have stock options they could cash in on or even borrow from retirement accounts, they could come up with the money for a more manageable down payment on a home this side of the Altamont Pass where prices of new houses are topping out at $600,000.
But there is more to what could be a tectonic shift in Bay Area housing where people who make Manteca’s median household income of $64,500 and have only their self to support often have to rent an apartment with one or two other people in order to still be able to afford to live near where the work and still have some resemblance of a life.
It will become more desirable for younger professionals to live in places like Manteca, Tracy, and Lathrop — part of an area that some have been referring to as the “new outer bay” in recent years. They can afford a fairly upscale apartment on their own without having to commute every day into work. At the same time they can access almost any attraction within the Bay Area in just around an hour if they travel during off comets hours. Couple that with a more robust Altamont Corridor Express on its way by 2022 as well as the promise of Valley Link to connect with BART and the appeal of living on this side of the Altamont shoots up with a large segment of potential buyers and renters who have the income that could rapidly escalate demand.
What this means is “attainable housing” — or whatever term you want to use for housing affordability to buy or rent for households dependent on what are fairly solid incomes from jobs in the Northern San Joaquin Valley — is going to be a rare commodity in relatively short order.
The time for talking about attainable housing strategies needs to end now. Manteca needs a moonshot approach of incentives through zoning, accelerated approval process, allowing developers to rework approved maps, and other tools so that the shift in housing demand that the COVID-19 pandemic is triggering won’t hit like a tsunami and wash countless existing local households onto the streets, down the valley, or out of state.