Tamara Wilson* is finally buying a home. At 29, she finally has a steady job as a retail clerk, and her boyfriend is working extra hours as a welder. Eager to leave her low-income apartment, which she said wasn't a good environment for her kids, she started looking for a place for her small family of four in October.
"I wanted three bedrooms and a yard," she said. "I had my heart set on that." She found that there wasn't much. Months went by, and in January she was still looking.
Locked out
She's not alone. The average Sky Valley family can't afford a house.
It's not that they can't afford a nice house or an average house. The median Sky Valley family, earning about $63,000 per year, can't afford any house. The most a family earning that sum should buy, according to conventional wisdom, is a house costing about $165,000, with an absolute cap of about $203,000. Of 181 homes listed for sale in the Monroe area last week, the cheapest was $229,000. In Sultan, $167,000 buys a 540 square foot house built in 1957. Last week, there were only two other homes priced in the neighborhood of $165,000; a single-wide mobile home near Index and a tiny two-bedroom built in 1910.
And that's for a family with no debt, able to make a down payment of $5,000. But the average American family is carrying $14,500 in non-mortgage debt, including credit cards and car payments.
With the average debt, even if the family has $5,000 for a down payment, that family would only be approved for a $151,000 loan according to a mortgage calculator at CNN.com. That won't even buy the cheapest studio-sized condo in Monroe. In fact, the median-priced home in Snohomish County right now is $340,000.
The purchase of the median home would require the pooled income of four waiters, or three and a half house cleaners, or two full time teachers, according to the Snohomish County Housing Consortium. And all of those individuals would have to be debt-free and in possession of a down payment.
The problem has become so serious that Snohomish County Executive Aaron Reardon has made it a top priority of his second term in office, which began in January. "We have people making more money than ever, but not able to afford homes," he said. "It's locked the middle income people out of middle-income homes."
In fact, middle income people are choosing to rent, and that creates other economic problems, he said. "That pushes the low income people out of the rent market," he said. And it keeps people from making the most important investment of their lives, he said.
"We're seeing individuals unable to start the ascent up the ladder of opportunity," he said.
Prices remain high
As recently as two years ago, home ownership opportunities were greater in the Sky Valley. Prices were lower. And there were more options for the low income buyer. But home prices increased at a dizzying rate. Homes bought for $250,000 two years ago are now selling at $300,000 or more. And those options for low income buyers are vanishing.
"Those 80-20 loans are getting a lot harder to come by," said Bart Dalmasso, owner of All Real Estate in Sultan. That loan, in which a person takes two loans, one for the down payment and one for the remainder of the mortgage, proved risky for investors.
Although the Sky Valley hasn't been affected much by the national sub-prime mortgage crisis, the kinds of loans that fueled the crisis are disappearing. Now, buyers are required to have good credit and a down payment of at least five percent. Yet prices remain high, because people still want to move here, interest rates are low and the economy is strong, said Nathan Gorton, President of the Snohomish County-Camano Association of Realtors.
"Our economy is great," he said. "When you look at interest rates, from a historic point of view, they are phenomenal. And people love to live in Snohomish County. Those things are fueling the housing market."
Prices also remain high because the cost of building a home is high. Land itself is high; some blame the Growth Management Act, a law which controls sprawl. It keeps towns from eating up farmland and spreading out costly infrastructure, but it limits the amount of land available for residential development, driving up the cost of buildable land. With the cost of that land plus materials, labor, fees and permits, the cost of building a home in the Sky Valley right now is about $200,000.
Finding the keys
Solving the basic problem of how to make home ownership possible for working families is complicated and tricky. Either the supply of cheap homes has to come up, or the amount of money available to buy homes has to come up. Housing experts thinks it will take both. "We need to increase the stock of affordable housing," Reardon said. "We will need 73,000 units of lower income housing. We have 10,000 today."
One way to get homes cheaper is to make it possible to build cheaper. One way to build cheaper is build more homes on less ground. That is something government can accomplish by zoning land for high density. But many constituents are resistant to density, said Gorton. "Citizens get grumpy when their community starts to change," he said. Clumps of closely packed houses appearing in a town can bring backlash from residents, he said.
Mixed developments in which low and high income housing is built in the same area, has been quite successful in some cities, said June Robinson, Executive Director of the Housing Consortium of Snohomish County. But many buyers need financial help to get into a home, even if they can afford the monthly payments, she said.
"If you really want people to own their own homes, you can look at down payment assistance," she said. "A lot of families pay as much in rent as they would a mortgage, but there's no way they can save the money for a down payment."
Another way to increase home shoppers' buying power is to cut taxes, and currently in the towns of Sultan and Monroe, condominium buyers are eligible for a 10-year exemption from paying property tax. And Fannie Mae and Freddie Mac, government-subsidised mortgage companies, are increasing the amount they will loan, and the FHA, which helps some first-time and low-income buyers get into homes, has reduced the amount of down payment they require from participants by half.
This month Reardon announced the formation of three work groups to study affordable housing issues. One will study manufactured housing communities, one will study veterans' housing, and a third will study barriers to home ownership.
"There groups are going to help us make some strong, solid recommendations that will result in new housing options for all Snohomish County residents."
Why buy?
For those who can find a way to buy, right now there exists a historic opportunity, say real estate professionals. "Right now it's perceived as a once-in-a-lifetime-opportunity," said Mitch Ruth, owner of Ruth Realty in Monroe, where he is also a city councilman. Interest rates are low, yet inventory is high and home values keep rising.
Although homes aren't rising at 2006's meteoric 22%, last year prices rose 6.5%, and the historic average is about 8.5%, he said.
"That's all the more reason why, if you're on the fence, this is a great time to be a buyer," said Gorton. "There's a bunch of inventory. Sellers are willing to listen to proposals." And home ownership is good for people, he said. "You're building equity," he said. "It's a forced savings account. If you look at the difference between wealth accumulation between renters and buyers, the difference is shocking. We've shown that the single best way to build wealth is home ownership." And home ownership leads people to take more interest in their communities, he said, adding that studies show better school performance for children whose families own, as well as a greater likelihood that those children, too, will grow up and own a home.
Taking the plunge
For Wagner, home ownership means stability for her kids. "The way I figured it, my parents are still in the house I was raised in," she said. "When my son goes to spend the night there, he sleeps in my old room. I want that for my family." In February, she found a three-bedroom mobile home in Gold Bar for 185,000. It has a yard.
So she began a long and arduous process of trying to buy it.
"It's the single hardest thing I've ever gone through," she said.
She and her boyfriend pulled their credit reports and figured out how to improve them. They paid off all their debts that were in collections. On other, larger debts, they made payments. A parent put up security so they could pay off $4,500 in debt, some of which was at 32% interest. They applied for loans and faced some refusals. They did a mountain of paperwork. They got help from FHA, and set aside a tax return for part of the down payment.
This week, they hope to hear that they have been approved for the loan. "We're doing whatever it takes," she said.
*As the woman was concerned about backlash for being critical of low income housing, she requested her real name not be used.
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