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The Real Estate Deal

Editor Cindy Zetts dishes on real-estate and development around Puget Sound: She lived in apartments, townhomes and houses -- a dozen of them in four states -- before settling in the Seattle area in 1997. After taking a bath on the sale of her first home, in South Florida, she vowed to wise up about real estate. She bought a house in Covington 10 years ago because, well, she could afford one there.

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November 9, 2008 1:01 PM

Manteca, Calif., shows effects of boom-bust-boom on regular Joes

Posted by Cindy Zetts

From reporter Elizabeth Rhodes at the National Association of Realtors conference in Orlando:

ORLANDO, Fla. -- With thousands of real-estate agents coming to Orlando from all corners of the country for the annual National Association of Realtors convention, there's bound to be a lot of story swapping. Especially in a tough market like this.

Cheryl McFall's story is especially illuminating. McFall is a Re/Max agent in Manteca, Calif., a town of about 70,000 near where I-5 and Highway 99 intersect between Stockton and Modesto.

For anyone who's been following California real estate -- thinking perhaps it's a harbinger of what's to come in Seattle -- Stockton has been a poster child of boom and bust. And now, even in this economy, boom again.

In September 2005, after a fierce run-up, Stockton/Modesto median house prices peaked at about $450,000. Today, those same houses are selling for $250,000 -- and they are selling, McFall says.

"A house that was $325,000 is now $150,000 to $180,000, and they're getting multiple offers,"
she said.

They're selling so fast that no one bothers to stage them.

"The public doesn't care; the houses are so far under market that there's no need," she said.

Who's buying? Moderate-income folks.

McFall says she can get a teacher, who's probably been paying $1,000 a month rent, into a house for $1,200 a month -- that's includes principal, interest, taxes and insurance. Investors also are buying, and some are even back into the old flipping game. No, it's not dead in Stockton.

So many homes have sold that inventory, 600 homes six months ago, is now half of that or less, McFall said.
The Stockton/Modesto area was particularly beset by subprime mortgages during boom times as house prices shot up out of the range of moderate-income earners. Many bought with no money down.

So it's perhaps no surprise that 85 percent of the homes available are either bank-owned foreclosed properties or short sales where the owner is in trouble and the lender is willing to sell to a buyer for less than it is owed.

That means the lender takes a bath, but McFall isn't sympathetic. During the bubble's runup, "banks made a ton of money, so I don't feel sorry for them," she said.

Rather, her sympathy lies with the Steady Eddies, those folks who paid their mortgages on time, kept up their homes and are now trying to sell. Those folks, only 15 percent or so of the market, "can't compete at all" with the foreclosures, McFall said.

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