SURGE IN FORECLOSURE SALES

Vultures Dominate Manteca Housing
Rental Value Spurs Strong Surge in Foreclosure Sales

Dennis Wyatt
Managing Editor
Manteca Bulletin

What is the best flippant way to describe the Manteca housing market in four words? The vultures are feasting.

A stratospheric 52 homes went pending in the week ending Aug. 11 for an annual pace – if it holds – of 2,704 homes.

The accelerated sales pace doesn’t surprise Florsheim Homes’ chief executive officer Joseph Anfuso.

“Those who expect homes to fall another 30 percent in value aren’t being realistic,” Anfuso said Friday at his company’s Valley Park neighborhood in southwest Manteca. “Home (values) can not fall below rental value.”

That is exactly why a large number of aggressively priced bank owned properties are now fetching 12 to 20 offers. That – coupled with short escrows – has created a sales frenzy rivaling the biggest boom year with one caveat – prices have returned to earth.

The current Manteca rental market is making it feasible for a positive cash flow out of the gate for investors in properties up to $180,000.

Rental demand, as Anfuso points out, is going up because of foreclosures.

“These people have to live somewhere and they’re not moving back to the Bay Area for the most part,” he noted.

Anfuso said the overwhelming majority of new renters who have moved out of foreclosures “make excellent renters.”

“They have been paying a higher mortgage payment than their rental payments,” Anfuso noted. “They were really de facto renters anyway as they didn’t have any skin in the game with zero percent down and low introductory loan terms.”

Those factors – low prices and a strong rental market – has prompted investors and first-time home buyers to create the sale activity frenzy among foreclosures that is essential before the rest of the housing market – non-depressed resale and new homes – can start bouncing back.

“The vultures were circling and waiting,” Anfuso said. “They have now definitely decided to buy.”

The strength of the investor rush and the fact they have cash in hand that can squeeze out even higher priced offers from first-time buyers with pre-approved loans due to the desire of banks with foreclosures to have as short of an escrow as possible has had a benefit for builders like Florsheim.

“We are starting to see more and more buyers who are tired of getting beat out time after time after inspecting homes and making offers,” Anfuso said.

One Florsheim Home buyer- who lost out on about 18 bids before landing an accepted offer – ended up walking away after hiring an inspector to determine all structural and cosmetic issues with the home.

“It was just too much money to fix it up,” Anfuso said.

Anfuso noted new homes come with everything in place and a warranty as well while foreclosed homes are sold as is. It isn’t uncommon for buyers of foreclosed home to immediately dump $20,000 into them after escrow closes to make cosmetic and structural repairs.

Valley Blossom – one of two Florsheim Home neighborhoods off Woodward Avenue west of Airport Way in Manteca – has homes starting at $249,990.

He also noted that in the Florsheim Homes neighborhoods you won’t find homes under duress or in foreclosure that helps add to the appeal since neighborhoods unscathed by foreclosure blight in Manteca are rare.

As for the market turn around, Anfuso said it is encouraging that the sales pace has essentially picked up to keep pace with the jump in foreclosures. The inventory of available homes in Manteca on Aug. 11 was 462 with all but 109 being either bank owned or short sales. That is down from a record high 651 homes available in September 2007.

“Foreclosures are driving everything now,” Anfuso said.

He had originally expected the foreclosure wave to start subsidizing by the end of the year but now expects it to extend into the first quarter.

“The amount of foreclosures has surprised me,” Anfuso said.

There have been 4,590 existing homes – including 560 in Manteca – sold in San Joaquin County’s seven cities via the Multiple Listing Service this year through Aug. 11.

Anfuso characterized that as a strong sales pace and was encouraged by it as “the foreclosures have to work their way out” before housing picks up again.

And, like other real estate experts, he doesn’t expect a return to the go-go days of price increases out stripping inflation significantly once the market hits bottom.

As for that elusive bottom?

“By the time you read it in the paper it’ll have been hit and you’ll be too late,” he said.

Given the rental value, an argument can be made that the lower end of the market or the sub-$200,000 homes that have minimal issues have already hit bottom.

Anfuso pointed to the dangers in waiting especially when it comes to interest rates.

“Sooner or later we need to strengthen the dollar,” Anfuso said. “We can’t keep having a $2 billion a day trade deficit.”

One way to combat it is to strengthen the dollar which would in turn bump interest rates up.

Anfuso expects most of California to bounce back before the rest of the country underscoring a basic tenet of the Golden State when it comes to housing and property in general – you can’t go wrong in the long-run.

That is why Anfuso said those who look long-range are pumping money into the Manteca market for commercial, office and business parks.

“Everybody has to take a long-term approach,” Anfuso said.

 

SEARCH FOR BANK OWNED HOMES AT  www.CentralValleyHomes.com

 

 

Carol Perdew
(209) 239-7979
www.CentralValleyHomes.com