One year after Nevada implemented a home loan program to help recruit and retain public school teachers, nearly 400 have bought homes in what has already been deemed a success.
It’s one of many programs in Nevada to help improve home ownership rates and make housing more affordable at a time inventory continues to shrink and prices continue to rise in the new home and resale market.
Teachers whose qualified income was below $98,500 a year are eligible for a below-market 30-year fixed interest rate loan, currently 3.625 percent, and $7,500 that can be used as a down payment and closing costs. If the teacher stays in the home for five years, they don’t have to repay the $7,500 that is otherwise prorated if they do.
The teacher program, which started Dec. 5, 2016, is part of a public-private partnership with no state or federal tax funds involved. When lenders make the loans and give the assistance to the homebuyer at closing, they sell the loans to U.S. Bank, which is the master servicer. Raymond James Financial sells the loans on the open market as a mortgage-backed security, and the difference in the rate of what the loan is and what it’s sold on the market creates enough of a spread to have the money go back into the program for the down payment assistance and state administrative costs, according to Dwight Pace, homebuyer programs supervisor for the Nevada Housing Division.
“Here’s 400 teachers who are now homeowners, and that will add to the stability of them being in the school district,” Pace said. “The $7,500 is a five-year forgivable note. We did that to give them incentive to stay as a part of the community. I know of number of people who are using this when promoting the state and using as a tool to attract teachers.”
In addition to teachers, more than 14,000 families statewide have been helped by the state’s Home is Possible program launched in 2014, Pace said. Buyers receive 5 percent of the loan amount for down payment and closing costs for homes priced under $400,000 and qualified household income below $98,500. Just like the teacher program, buyers don’t need to be first-time homeowners and no federal or state tax dollars are used to fund it.
“The idea behind the program is a lot of homebuyers have the ability to make a monthly payment, but they don’t have the ability to save enough for the down payment and closing costs, and that’s where we come in and help them purchase that home,” Pace said.
Last spring, the Nevada Housing Division also launched a program that provided $1,500 for closing costs and down payments to those who earn 80 percent or below median income. About 30 people are participating in that program, Pace said.
The need for down payment and other assistance programs comes as home prices continue to rise, pricing some buyers out of the market and shrinking inventories that has stiffened competition for homes.
Before the downturn, new home prices hit a high of $350,615 in April 2006. That dropped to a low of $183,213 in June 2010 and by November reached $355,905, according to Las Vegas-based Home Builders Research. On the resale market, the median price of single-family homes peaked at $315,000 in June 2006. It dipped to $118,000 in January 2012 but has since rebounded and was $261,150 in November, down slightly from October, according to the Greater Las Vegas Association of Realtors.
The lack of inventory makes it harder to increase homeownership rates in Nevada that lag behind the national average and have fallen sharply since the housing collapse that started a decade ago. The Nevada homeownership rate is 55 percent today compared to 63 percent in 2007. By contrast, the national homeownership rate is 64 percent today, down from 68 percent in 2007, according to Steve Aichroth, the new administrator for the Nevada Housing Division.
“We always like to see home ownership rates increase because you get more stability and involvement in the community and less transiency and more investiture in the local community,” Aichroth said.
The tax bill approved by Congress would not affect the Nevada Housing Division’s ability to provide the homebuyer programs, Aichroth said. On Nov. 15, the Nevada Housing Division, however, did suspended its Mortgage Credit Certification, or MCC, program due to uncertainty of the tax legislation and what appeared in the House bill originally, Pace said.
That’s now being reinstated with the signing of the tax bill by President Donald Trump. Under the MCC program, the division has the ability to pass on tax credits to qualified first-time homebuyers, Pace said.
Finding assistance for first-time buyers has become more difficult as privately and publicly funded programs end or aren’t renewed, said Michelle Merced, executive director and president of Neighborhood Housing Services of Southern Nevada
In March, the nonprofit received $5 million from Wells Fargo and NeighborhoodWorks America to boost homeownership. Homebuyers receive a matching down payment grant and receive a maximum of $7,500 for a $5,000 contribution. A household of four can earn up to $50,300.
Since April, Merced’s agency placed 468 households that fall at or below the area median income, Merced said. There’s only one slot left out of 561. Others are reversed and waiting to be funded.
When the agency got funding for a similar program in 2012, the money lasted for two years for helping 566 with down payment assistance, Merced said.
“There’s even higher demand because people are moving from Florida and anywhere that was affected by the hurricanes, like Puerto Rico and Texas,” Merced said. “We have people moving here from California because of the fires.”
Starting in April, the agency will launch a down payment program through money provided by Federal Home Loan Bank through Charles Schwab in which people will get $15,000 if they put up $5,000, Merced said. A similar program was done with funds from Nevada State Bank but that ended in 2016, she said. It covers households earning up to 80 percent of the area’s median income, which means a one-person household can’t exceed $35,250.
The agency previously did down payment programs with North Las Vegas that ended in March and Clark County two years ago but those programs that use federal dollars weren’t renewed, Merced said. North Las Vegas, however, said it’s renewing a down payment program in March.
Las Vegas has had a neighborhood stabilization program in which the city uses federal dollars to acquire property and rehab it and resell to low-to-moderate income buyers. City officials said the last home has been sold and the program is closing out.
Henderson continues to operate its federally funded program for lower-income households and offers a no-interest deferred loan program in which the loan amount does not exceed 6 percent of the purchase price or $10,000, whichever is less, according to Kathleen Richards, a senior public information officer for Henderson. Applicants must have lived or worked in Henderson for a year and not have owned a home in the previous three years. It’s had 13 participants since July 2012.
“With Henderson’s program, if you know the market, it has the highest dollar per square foot,” Merced said. “If you fall within a certain income level, the houses are not even affordable and how do you take advantage of it.”
Affordability continues to be a growing problem in the marketplace as prices continue to rebound from the housing collapse, Merced said. There’s not many affordable homes on the market and there’s a lot of competition for them, she said.
“Anything that’s less than $250,000 is moving within 72 hours,” Merced said. “It doesn’t stay on the market. The price points are getting higher and to bridge the gap for our low-to-moderate income homeowners is getting really difficult. You could once buy a house down the street from our office (849 Civic Center Drive in North Las Vegas) for $35,000 (2009 and 2010), and now you can’t find anything for less than $100,000 right now.”
Michele Johnson, president and CEO of the Financial Guidance Center handles down payment assistance programs that allows qualified buyers to receive $3 for every $1 they contribute with maximum match of $15,000.
“We can do 60 to 65 a year with $1 million,” said Johnson who added she’s concerned where the housing market is heading. “It’s becoming unaffordable again to the normal buyer. If you’re going to buy you have to sit back and be patient until that home you can afford comes along. It reminds me what it was like before we had the last crisis. It was affordable after the crisis and people were able to take advantage of it. If you’re working at a hotel and making $40,000 a year, you’re not going to be able to afford a $350,000 home.”
Chris Bishop, incoming president of the Greater Las Vegas Association of Realtors, agrees that there’s a growing concern about affordability as inventory shrinks. There’s less than a month of inventory of homes of $250,000 and less by GLVAR estimates.
“We’re concerned that if the trend continues we might price people out of homeownership,” Bishop said. “It’s a good time for people who own homes right now that are seeing their values go up, but if you’re looking to buy a home, it will be tight.”
While some are concerned about a housing bubble returning, Bishop said that won’t be the case because the vacant homes after the collapse were gobbled up by investors who have been renting them out. They’re not sitting vacant as they were a decade ago when speculators could no longer find buyers to flip the home.
Melissa Foster, branch manager at Evergreen Homes Loans, a mortgage lender, said the first-time homebuyer programs have proven popular and without them, it would mean fewer buyers in the marketplace. That would be a shame for those who are renting homes today with interest rates near 30-year lows in the low 4 percent range, she said.
“Many are paying $1,500 a home, and they can get into a pretty good home for $1,200 to $1,500 a month, Foster said. “That’s good because rent always goes up and at least a house payment is stable and you know the rate is fixed.”
With a lack of inventory in the resale market, Foster said builders of homes, condos and town homes are targeting first-time homebuyers to cover their down payments and closing costs with no money out of pocket.
Even homeowners who lost their property during the mortgage meltdown are slowly coming back into the marketplace because there bankruptcy or foreclosure has moved off their credit report, Foster said.
“Whatever it was that stopped them from buying over the last three to seven years, they’re back in the game,” Foster said. “That has helped the housing market and builders because these people couldn’t buy because of their credit situation.”
Anything that increases those homeownership rates will be good for the valley because it’s a forced savings accounts that will grow in equity and allow them to deduct interest payments on their taxes, Bishop said.