Experts: Home ownership out of reach for many
By Jon Hawley
Sunday, August 4, 2019
Ten years ago, the median price of a house in the United States was about $220,000. Now it’s $320,000, according to the Federal Reserve Bank of St. Louis.
There’s a shortage of almost 200,000 affordable homes in North Carolina — and that’s just for renters, not home-buyers, the National Low Income Housing Coalition estimates.
And in Pasquotank County, developers say they can’t really build a decent house for less than $150,000. Meanwhile, a good, older house is still likely to cost well over $100,000.
People whose income matches the county’s median household income — now about $47,000, according to the U.S. Census Bureau — can make those numbers work if they keep their spending and debt under control.
But for the one in five county residents in poverty? Impossible, local housing experts acknowledge.
The costs and challenges of providing affordable housing is getting new attention following last week’s kickoff meeting for Habitat For Humanity’s “Cost of Home” initiative. The Elizabeth City Habitat is joining the national effort, which is a response to housing costs consuming more than half the annual income of almost 19 million Americans. Housing should consume no more than 30 percent of someone’s income; otherwise, they won’t be able to afford other necessities, housing advocates and lenders agree.
Leading members of the Home Builders Association of Northeastern North Carolina provided their perspective for this story, as did Elizabeth City Habitat President Jane Elfring.
Ken Corbo has been in construction since the 1960s and has operated Corbo Custom Homes since 1997, he said Friday. He’s also the association’s immediate past president. Today he builds heavily in Currituck, citing the booming NC Highway 168 corridor where Virginians are snapping up cheaper land across the state line. He also prides himself as a master builder, and explained he does ask people to pay a little more for quality, and the assurances of various lifetime warranties.
Houses have definitely gotten more expensive though, Corbo said. A house that costs $150,000 to build today might have cost $80,000 or less a decade ago, he said.
Material costs are a “whirlwind” these days, Corbo said. Lumber, steel, roofing, concrete, they’re all expensive, and the markets can be volatile. Steel tariffs have a ripple effect across home prices and something as distant as a mill fire in Canada can suddenly make oriented strand board, an alternative to plywood, jump in price, he said.
In fairness, incomes have also grown in the last decade, and Corbo explained the size of someone’s paycheck isn’t always what prevents them from affording a house.
It’s all the other spending and debt already eating up their income, he said.
“Nobody’s been saving,” Corbo said. A lot of millennials are trying to buy homes today, he said, and he sees them overloaded with debt and bills — student loans, payments on new cars, pricey smartphone and internet plans, etc. They come in with little or no down payment for a house, complicating their qualification for a loan. Lenders do sometimes accept down payments as low as 3 percent of a home, he said.
Corbo also said a rule of thumb is that, for every $100 in bills, someone loses $10,000 on their credit line.
Mack Nixon, of Albemarle Home Builders, said he’s been building with his brother, Julian, since the 1970s. He also explained he built some more affordable developments in Elizabeth City, including Old Oak and Summerfield, and he’s building in Hunters Lake now.
To build a modest, three-bed, two-bath house in Elizabeth City today would cost about $175,000; a home in Hunters Lake costs a little above that, he noted.
Nixon also explained he could build a little cheaper in Summerfield, down to $150,000, where the lots are smaller.
Materials have gotten pricier, he acknowledged, but many factors add to a home’s cost; zoning requirements, homeowners’ association covenants, and, of course, the features and square footage people want.
Even holding costs down, is it impossible for someone to get a decent, new house on minimum wage?
“Yes, I’m not going to beat around the bush,” Nixon said.
However, few people make only minimum wage anymore, Nixon said. Even the lowest-paid laborers in home-building tend to make $15 an hour or more, he said.
Buying a home is totally achievable on Pasquotank’s median household income, Nixon said. He was able to get a teacher who makes about $44,000 a year into a home recently, he said.
Like Corbo, Nixon reiterated would-be home-buyers have to keep their debt under control and their credit scores good.
Norma James is a real estate broker for Taylor Mueller realty and comes from a family of builders.
She said Elizabeth City does lack a supply of affordable housing. There’s a shortage of new construction in the $130,000 to $170,000 range, she said. Many growing developments in and around Elizabeth City have homes costing around or well above $200,000, based on online listings.
For Pasquotank’s median income of $47,000, it’s possible to buy a home, she said, but people will likely have to go with pre-built or manufactured homes.
Elizabeth City’s local listings also show relatively new, three-bedroom houses are still priced well over $100,000.
So, houses are expensive. What could be done to fix that?
Corbo and Nixon said that’s a complex question whose answer has many parts.
Builders have to make a profit, but they can also cut costs by being smart, Corbo said. They can plan rooms’ dimensions to not waste sheet rock or other materials, and build up instead of out. A second floor holds down the square footage of foundation and roofing, two major expenses, he said.
Home-buyers also need to think about more than square footage in controlling costs, he said. A living room is fairly cheap, but high-end appliances and bathrooms add up quickly.
Asked whether regulations are adding to home prices, Corbo and Nixon agreed building codes are always getting more stringent, and therefore expensive. However, they didn’t name any codes they disagreed with. New codes also increase the quality of homes, such as in durability and energy efficiency.
That touched on another issue: Corbo said there’s also a shortage of young builders in the region. There are “dinosaurs” who aren’t embracing new technologies, he said.
Corbo also said that building, like other industries, benefits from economy of scale. A large company that buys in bulk to build a lot of homes at once could drive costs down a lot, while smaller builders will struggle.
James also pointed out that cheaper homes mean a smaller profit for builders. That suggests that, were a developer trying to build more affordable housing, they might need to build a development with many houses.
James also said builders would likely need government incentives to offset costs for those units. Such incentives have also been offered to local apartment complexes.
Habitat for Humanity is unique in its ability to hold down the prices of homes it sells to worthy buyers. On Friday, Elfring explained Habitat relies on volunteer labor, donated materials, and “sweat equity” from home-buyers themselves to put them in a home. Habitat homes might be sold for $75,000 but be worth $100,000, she said, adding buyers enter into a “soft second mortgage” sometimes that doesn’t add to monthly payments, but ensures they don’t try to immediately sell the house.
Even Habitat often turns people away though, she said, due to their limited income or, more often, excess debt and bad credit. Many local lenders have to do the same, forcing many city residents to remain renters.
Elizabeth City has an “owner-occupied housing unit rate” of 38 percent, according to the U.S. Census, meaning almost two-thirds of city residents are renters.
There’s an unfortunate irony in that. Home mortgages can be cheaper than rent, Elfring said. Homeowners do take on taxes, insurance and maintenance, however, she noted.
Elfring also believes more assistance should be available for first-time home-buyers, particularly in down payment assistance. Many people could afford monthly mortgages, but can’t get past the upfront costs of buying a house, she said.