Housing funds get left on the table
The dramatic rise in housing prices last year has some rolling in equity and others getting rich quick, while a growing segment of the population is being priced out of the house hunt despite interest rates below 6%.
These home seekers, typically working families looking for their own piece of the American dream, have in years past been able to take advantage of the Southland’s more than 100 county, city and nonprofit assistance programs, which offer help with down payments, second mortgages, matched savings programs and more.
But most programs have limits on the price an applicant can pay for a home. In many cases that maximum is well below today’s record-breaking Southern California median home price, which in February reached $292,000, according to La Jolla-based DataQuick Information Services.
And while some programs are raising caps, they are having a hard time keeping up with a housing appreciation rate that last year reached 20%.
As a result of the high cost of housing, many local homeownership programs are at a standstill, report administrators of city, county and nonprofit agencies.
Patty and Derek Barrios wanted to take advantage of the city of Downey’s $40,000 silent second mortgage program -- a loan they would not have to make payments on for 20 years.
They gave up their house hunt last fall, however, because they could not find anything under the program’s maximum price limit, which then was $237,500. Instead, the couple bought Derek’s parent’s home for $32,500 less than its appraisal price just so they could qualify for Downey’s program. They closed escrow in December.
“Without my in-laws, we would have had to settle for a lot less,” said Patty, 34, who has three children, ages 4 to 11, and is expecting another.
Although interest in the city’s home-buyer assistance program is high, according to Downey city housing manager Ed Velasco, the Barrioses were the only homeowners in that city to use the program since July 2002. Yet Downey has $200,000 to $300,000 in Department of Housing and Urban Development funds to loan.
The city raised its maximum purchase price in January to $275,500, a figure set by HUD based on national home prices determined by mortgage financing source Fannie Mae. But the median home price for a single-family home in Downey now surpasses $300,000, according to DataQuick.
When the market was not so inflated, 8 to 10 qualifying home buyers a year were able to take advantage of Downey’s program. Not anymore.
“At one time the program was working,” Velasco said, “but then housing went up ... it pushed potential people out of the program.”
In Whittier, homeownership programs are funded by city tax dollars, providing more flexibility in making adjustments based on local market conditions. The purchase price cap for the last four years has been $210,000. But in keeping with the city’s median housing cost of $239,000 in 2002, administrators raised the maximum purchase price limit in December to $243,000.
The increase has been little help. Only one loan for the city’s first-time home-buyer program has been funded since July, the start of the city’s fiscal year, according to Javier Reyes, Whittier’s community development coordinator. “People are having a difficult time finding a home, given the market pricing.”
Typically, Reyes said, the city’s total funding for such programs -- this year about $260,000 -- is gone by the fall. Only recently has Reyes started to see some activity, with two new applicants in the pipeline for loans.
While first-time buyers hoping to use assistance programs are struggling in Los Angeles County, in Orange County, the median sales price for all homes rose in February to $384,000, according to DataQuick.
“We are in a crisis, here, as far as affordability is concerned,” said Glenn Hayes, executive director of the Orange County Neighborhood Housing Service, a nonprofit agency that provides loans for home purchases and home improvements as well as other assistance and counseling to potential home buyers. Even though that agency can set its purchase price limits to $322,700 based on Fannie Mae conforming loan limits, that figure still isn’t high enough by Orange County standards.
“We’ve hit a wall,” said Hayes, who has been with NHS for 22 years and remembers when the agency’s housing fund was created nine years ago. Back then, he said, the median price for an Orange County home was $140,000.
“We’ve told people that if they work hard and pay their bills and have good credit, they can buy a home,” he said. “But it’s to the point now in Orange County that you can’t do that.”
There are currently 130 potential “mortgage ready” NHS home buyers who can’t find homes, according to Hayes. Many are giving up, he said, or moving inland.
“These are good people, working people, with a down payment and closing costs,” he said, who can’t find housing near their work.
One such potential buyer is Gary Martinez, 38, who saved $13,000 with NHS’ 3-to-1 matching-fund program while attending their mandatory 10-month homeownership course. After completion of the program, the applicant has eight months to shop for a home to take advantage of the matching savings.
Martinez, who grosses $40,000 a year, had hoped to shop for homes with a purchase price of $170,000. He wanted to trade his $785-a-month Anaheim rental for a home closer to his work as a warehouse manager in Irvine.
“When I really started looking for a home, reality set in quick,” Martinez said. “I have the money, but I have nowhere to spend it.”
After looking at 25 homes in Orange, Anaheim and Tustin, Martinez has decided to wait the market out rather than settle on homes too small or those he felt weren’t worth their asking price. Instead, he’s moved to another rental for $950 a month in Tustin. Waiting means he could potentially lose the matched savings from NHS.
Martinez said if he had gotten into the market earlier, rather than waiting to complete the agency’s 10-month program, he might have had success.
In the months Martinez spent finishing the mandatory homeownership classes, median prices in Orange County rose 11.5% for single-family homes and 15% for condos. NHS is now trying to extend the period in which Martinez can buy.
In some lower-cost inland areas administrators report ownership programs are still working and getting people into homes. In Fontana, for example, where the city’s maximum purchase limit is $150,000, the median cost in 2002 for a condo was $87,000 and for a single-family home, $166,000, according to DataQuick. Programs there are on pace with previous years, said Sean Rogan, the former housing development manager.
And in areas such as Upland, where the maximum purchase price limit is $213,500, the situation is similar. The city of Upland has helped nine families get into homes since summer, according to housing coordinator Susan Jokai. Buyers are finding condos well under the limit while those seeking homes are making sacrifices, such as buying older one-bedroom homes below the 2002 median price of $280,000.
“Families with as many as two children are buying one-bedrooms with a large lot hoping they can build on an additional room in the future,” Jokai said. Others are converting dining rooms into bedrooms, she said, to shoehorn everyone in. “Somehow these families are trying everything to make it work.”
Some lenders likewise report that programs are still meeting homeowners’ needs, provided buyers are willing to lower their sights.
Homeowners need to think condos or townhomes, said Mary Salinas-Duron, a senior vice president with Countrywide Home Loans, or consider pooling resources with another family to buy a home.
“The thing that is happening, though, is that some families are looking for a dream house,” she said, “and that is a dream house they can no longer afford.”
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For more on buyer assistance plans
Where to find information about homeownership assistance programs:
* For Los Angeles County programs, visit www.lacdc.org.
* For programs in cities in Orange, Ventura and San Diego counties, visit ahahousing.com.
* Check with individual cities about any programs they may have.
* Check with the Community Redevelopment officer at banks that have mortgage departments.
* To learn more about neighborhood housing services in various counties, visit www.nw.org.
* For information on nonprofit agencies offering assistance programs, visit the Southern California Assn. of Non-Profit Housing’s Web site at www.scanph.org.
* Check your local library for “Southern California Guide to Homebuyer Programs,” 1999, published by Affordable Housing Applications.
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Allison B. Cohen can be reached at a.cohen@ix.netcom.com.
