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Home values plunge again in Stanislaus County, Calif.
Nov 21, 2008 (The Modesto Bee - McClatchy-Tribune Information Services via COMTEX) --
Home sales prices took another tumble in October, as the three-year slide in home values continued.
Stanislaus County homes sold for a median $161,500 last month, which was $17,500 below September. Home prices have dropped a staggering 59.2 percent below the $396,000 peak hit in December 2005.
Stanislaus home prices have fallen back to spring 2001 levels, wiping out more than seven years of appreciation.
Merced County is even worse. Median-priced homes there sold for $136,750 last month, which was down $3,250 from September. Merced prices have plunged 64.3 percent since peaking at $382,750 in December 2005. Prices haven't been that low in eight years.
San Joaquin County did a bit better last month. Its median sales price reached $200,000, which was $8,500 more than September. It was the only county in the Northern San Joaquin Valley where prices didn't decline last month, according to sales statistics from MDA DataQuick Information Systems.
But San Joaquin County home values still are 55.7 percent below their November 2005 peak of $451,500.
"It's impossible to say when the bottom will hit," said John Knight, professor of finance and real estate at the University of the Pacific. "I never anticipated such a huge drop in housing prices so quickly."
On the positive side, the number of homes sold has risen dramatically since last year throughout the region. More than 2.5 times as many houses sold this October as last October.
"That sales volume is good because it means the inventory of homes is starting to clear out," Knight said.
There's been a glut of homes on the market because of foreclosures. Many of those repossessed properties now are bargain-priced as lenders try to cash out what they can from their so-called toxic assets. That's created buying opportunities.
"Investors have re-entered the market," Knight said. Prices are so low that "now it actually pencils out to buy a rental home. Investors now can cover their costs with rent."
And for "prudent consumers who waited to buy," Knight said, "there are some tremendous opportunities now. Prices really cannot go much lower ... because it's becoming less expensive to own than to rent. That provides kind of a floor to housing prices."
So how affordable are houses?
Kevin Hawes, a loan consultant for Ability Mortgage in Ripon, ran the numbers.
To buy a $161,500 home using the most popular Federal Housing Administration- insured loan, a buyer would need to put 3 percent down. That's $4,845. After the mortgage premium is added, the loan cost would be $159,396.
Figuring a 6.5 percent, 30-year fixed-rate loan, the mortgage payment would be about $1,267 per month, including principal and interest, home insurance, property taxes and mortgage insurance.
To qualify for a $1,267 monthly payment, Hawes said the buyer would have to earn about $4,000 per month, or $48,000 per year.
Stanislaus County's median family income was $57,511 last year, according to U.S. Census Bureau estimates. So most families, theoretically, could afford to buy homes now.
But qualifying for home loans isn't as easy as it used to be, Hawes said. Buyers must verify their income and have a good credit history, with credit scores of at least 620.
"FHA loans are great loans," Hawes said. FHA is part of the U.S. Department of Housing and Urban Development, and its insured-loan program is what most first-time buyers use in this region.
Investors must get mortgages elsewhere, but Hawes said there are loans available for those who make large down payments.
For a $161,500 home, an investor who put 20 percent down could get a 7 percent loan. The total monthly cost for such a loan would be about $1,066.
Hawes said interest rates are even lower for those who make larger down payments, which lowers monthly costs even more.
But what kind of home will $161,500 buy?
Here are few examples from current real estate listings: East Modesto: A three-bedroom, two-bath, 1,572-square-foot home with a 6,100-square-foot lot, built in 1973 on Bella Terra Drive, $160,000.
West Modesto: A four-bedroom, two-bath, 1,848-square-foot home with a 10,000- square-foot lot, built in 1961 on Shirley Court, $160,000.
Riverbank: A three- bedroom, three-bath, 1,813-square-foot home with a 6,970-square-foot lot, built in 1989 on Topeka Street, $160,000.
Patterson: A four-bedroom, 3.5-bath, 2,669-square-foot home with a 6,360-square-foot lot, built in 2004 on Meadow Creek Drive, $160,000.
"There are incredible opportunities out there," Hawes said. "I try to tell everybody that this may be the only time in a long time to come when first-time buyers can get a home."
Knight agreed the long-term outlook for Northern San Joaquin Valley homes is good.
"The location of this valley is still very positive," he said, referring to the climate, the proximity to the Bay Area and housing affordability for commuters.
"Ten years from now, we'll have some sort of normalcy between supply and demand," Knight predicted. He noted how new home builders already are preparing for where to put new subdivisions. "The market will come back."
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