Mar. 04, 2007
Copyright © Las Vegas Review-Journal
FINDING AFFORDABLE HOUSING
Skyrocketing prices have left fewer choices
By Holly
Ivy Devore. Housing affordability has come into question
during the past few years when home prices rose at a greater
percentage than salaries. In recent months, home prices have
seemed to level off with a slight decline.
The
Greater Las Vegas Association of Realtors' (GLVAR) most
recent sales statistics support this contention. In January,
GLVAR reported the median sales price of a single-family,
detached home was $302,000, while the median sales price of
attached condominiums/townhomes was $204,450. These numbers
may remain less than cities in Southern California, but more
than the valley's early 2004 housing median price when it
hovered around $200,000.
Lower-priced homes and assistance do exist, if one knows
where to find them.
Lowest-priced neighborhoods
Devin
Reiss, 2007 GLVAR president and owner of Realty 500 Reiss
Corp., said the resale market may offer lower-cost homes
comparable to new ones, but sometimes there is not much of a
price difference because of builder incentives.
"We've
seen the median price of resale home sales go down slightly,
and for the most part new-home prices have gone up. But,
builders make up for that because they offer a multitude of
incentives to buyers. You may find a lower price on a
resale. It ultimately comes down to what the terms are and
what the incentives may be," Reiss said.
"The best
thing to do is to get with a lender prior to shopping for a
home. That way you know what you can afford and your lender
can assist you ... in the structure of your (purchase)
offer."
A home's
size, site, amenities and location factor into its cost.
Analyst
Larry Murphy of SalesTraq, a local research firm, said
brand-new houses are available at two-thirds the cost of a
median-priced home. According to data compiled on Feb. 9,
three neighborhoods offered brand-new, detached houses with
base prices under $200,000: American Premiere's Alexander
Park offered a 1,005-square-foot plan in the eastern valley
for $198,990; Richmond American's Sapphire Springs featured
a 1,136-square-foot house in the northern valley for
$199,240; and Storybook's Encantos offered a
1,199-square-foot plan for $199,900.
According
to the GLVAR, in mid-February 373 single-family, detached
homes were listed for sale under $200,000 on the Multiple
Listing Service. Some are manufactured homes and small
properties in outlying areas of Southern Nevada. To search
properties, visit GLVAR's site at lasvegasrealtor.com or
listings on the Las Vegas Review Journal's Web site at
reviewjournal.com/realestate/resale.
SalesTraq
also reported on Feb. 9: KB Home's Tripoly at Kings Hills in
North Las Vegas featured the lowest-cost attached design --
a two-bedroom, two-bath, 1,229-square-foot unit -- priced
from $163,190. Condominiums converted from apartments
offered the lowest-cost, new-product option. Valencia,
located in the southeast, offered the lowest-cost unit
priced from $126,000 and measuring 717 square feet.
Mortgage products impact affordability
Does the
existence of these lower-cost homes mean that the valley has
affordable housing? Organizations such as the National
Association of Realtors use specific methodology to
determine housing affordability. Keith Schwer, director of
the Center for Business and Economic Research at UNLV,
explained that the NAR Housing Affordability Index measures
whether a typical family can qualify for a mortgage on a
typical home at prevailing mortgage rates.
"The
calculation assumes a down payment of 20 percent of the home
price and it assumes a qualifying ratio of 25 percent. That
means the monthly P&I payment cannot exceed 25 percent of
the median family monthly income," Schwer said.
Southern
Nevada does not fare well with this criteria, considering
that the median household income is less than $50,000.
Myriad
programs strive to offer affordable mortgage payments.
"The new
financing is in part an effort to increase homeownership
among people who might not otherwise be able to buy a home.
As prices rose rapidly, particularly in a market such as Las
Vegas and California, it increasingly became the financing
approach of choice, if not the only approach, because of
housing affordability problems," Schwer said.
Adjustable-rate and interest-only mortgages may offer lower
monthly payments than a traditional, 30-year mortgage, but
there are disadvantages, according to Diane Schramel,
president of the National Association of Professional
Mortgage Women in Las Vegas and president of Summerlin
Mortgage. Adjustable-rate loans may offer a lower
fixed-interest rate initially; monthly payments increase
when the lower rate automatically adjusts upward according
to an index. With an interest-only loan, a borrower's
payments go toward the loan's interest, not the principle.
"While an
initial low payment can help a buyer get into a house, it is
important to evaluate each buyer's special circumstances
such as how long they plan to own the house. The possibility
of rate increases isn't much of a factor if they plan to
sell the home within a few years ... or if they expect their
income to increase," Schramel said. "In some situations, the
monthly mortgage payment is more important to a buyer than
the interest rate."
Another
program that may offer lower payments is a 40-year,
fixed-rate mortgage because repayment is spread over a
longer time frame.
"However,
some of the positive effect of lower monthly payments is
affected by a higher rate that is typically charged on the
40-year loan. Loans with longer terms carry higher rates
because of the added time frame where a default may occur
and because lenders and investors seek compensation for the
longer period of time that their money is tied up," Schramel
said. "Another disadvantage is that the homeowner builds
equity at a very slow pace."
Another
consideration is Private Mortgage Insurance, which is
typically required if a purchase lacks a 20 percent down
payment. To avoid PMI, some buyers opt for a first and
second mortgage at initial purchase.
"A
mortgage professional will be able to evaluate the
cost-benefit of having a second mortgage versus mortgage
insurance and to determine which product fits your needs,"
Schramel said.
Programs assist first-time, low-to-moderate income buyers
"Programs
such as FHA and VA loans take into consideration various
factors and recognize that first-time home buyers have
special circumstances," Schramel said.
Assistance is offered through the Nevada Department of
Business & Industry Housing Division.
"The
Housing Division is a perfect example of how well the
public/private sectors can effectively work together. The
Division can provide the lower-interest rate mortgages
through the public sector while working with the private
sector's home builders, developers, Realtors and mortgage
lending companies," Chas Horsey, administrator of the Nevada
Housing Division, said. "Working together we can make it
easier for many of our residents to achieve their dream of
homeownership."
Its
programs are available through more than 40 lenders. For
information, call 775-486-7220 or visit
nvhousing.state.nv.us.
Consumer
Credit Counseling Service is another organization that
offers assistance, including free home-buying seminars.
"Anyone
can attend our first-time home-buyer seminars. Higher-income
folks who purchase a home for the first time often have the
same questions and issues," Michele Johnson, president and
chief executive officer, said.
The
nonprofit organization also offers down-payment assistance
programs for low-to-moderate income families, financial
counseling and a debt-repayment program. Counseling is
available to homeowners seeking reverse mortgage and those
experiencing increased payments because adjusting ARMs.
"We also
provide a credit report review service," Johnson said. "...
It's a matter of budgeting, ensuring where you can make
payments timely, budgeting so that you can liquidate any
outstanding debt you have."
To
contact Consumer Credit Counseling, call 364-0344 or visit
cccsnevada.org.
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