Housing strategies for tough times

In 2002, President George W. Bush designated June as National Homeownership Month.

“A home provides shelter and a safe place where families can prosper and children can thrive,” the president stated in his official proclamation. “For many Americans, their home is an important financial investment, and it can be a source of great personal pride and an important part of community stability.”

In the seven years since that proclamation, homeownership has come to the forefront of many American lives, unfortunately not always in positive ways. Although families everywhere are losing homes to foreclosure, walking away from their homes and their communities in search of better employment, or falling behind in mortgage payments, some Pagosa Springs residents are finding programs to help them achieve the stability they need as homeowners.

Heidi Mueller has been a renter the 10 years she has lived in Pagosa Springs. She heard of a self-help program through the local nonprofit Colorado Housing Inc. (CHI), but figured that, as a single mom making $10 an hour, she wouldn’t be eligible for the program. A co-worker who lives in a CHI home encouraged Heidi to apply for the program anyway. According to CHI staff, qualified applicants must have adequate income to show payment ability, must not exceed the yearly salary cap that would allow them to apply for a conventional bank loan, and should not have a high debt-to-income ratio. For those applicants who have credit and debt problems, the non-profit offers free credit counseling to help clear up their records.

With a good employment history and the ability to make monthly mortgage payments, Heidi qualified for the CHI program and is nearing the end of her build. Although two harsh Pagosa winters and other construction difficulties caused delays, the year-and-a-half process has brought her to within one month of moving into a new home in Pagosa Lakes, surrounded by tall Ponderosa pines. Heidi said the three-bedroom, two-bathroom house is perfect for her and her kids.

In addition to not needing a down payment for the loan, the benefit of the CHI self-help build is the instant sweat equity homeowners earn by completing much of the construction process themselves. Under the guidance of a construction supervisor, any work the homeowners can accomplish — siding, painting or trim work — is done without paying a subcontractor. Using this process, families can get into a new, energy efficient home for much less than the same home would cost to purchase. In addition, the homeowner has learned skills that will help them with maintenance and upkeep of their home. CHI is finishing its current build of six homes in Pagosa Springs, as well as five more in Bayfield. The organization has completed over 100 homes in Archuleta County alone, and it is accepting applications for their upcoming 2009 build.

Another non-profit housing organization based in Pagosa Springs, Habitat for Humanity of Archuleta County, is in its 15th year of building homes for local families, with one home currently under construction and another set to break ground this summer. Functioning almost entirely on grants, donations and volunteer labor, Habitat has built 19 homes in the county for families that would otherwise not be able to afford one. The non-profit serves low-income families who have annual incomes between 30 and 60 percent of Average Median Income (AMI) in Archuleta County. Families are required to contribute 400 to 500 hours of sweat equity to their homes. Although it is becoming more challenging to acquire funding to cover construction costs, the organization is successfully continuing the mission of building one to two homes per year in Archuleta County.

In addition to rising construction costs, current challenges that residents may face when looking to build a home in today’s market include finding a buildable lot that is affordable for their budget. For Lima Kneipple, a renter and young widow with two children under 7 years old, already owning her lot was a huge money saver. When she lost her husband earlier this year, the family was in the process of building a 2,400 square-foot home on the land they owned. When she suddenly became a single mom in the middle of the build process, Lima was worried she wouldn’t be able to keep the home once it was complete. But, because her construction loan is financed through a USDA direct-loan program that offers payment assistance, Lima is confident her job as a waitress will be enough to allow her to achieve homeownership. The direct loan program is administered through the Cortez branch of USDA-Rural Development, and because there is no third-party bank involved, interest rates are extremely low, making owning a home accessible for a single mother like Lima. Her journey began last summer when a friend put the family in contact with the Rural Development office in Cortez and they filled out paperwork for eligibility. Once the family’s loan amount was determined by their income and debt, the couple was able to find their own builder and choose custom house plans for their lot. A representative from Rural Housing visits the home periodically to check progress and will do a final visit and inspection when the house is finished.

The conventional route

While being a first-time homeowner is a life changing experience, acquiring a new home is not just for young families. A local woman in her 60s went through a recent divorce and lost her home in the process. After 11 years in Pagosa Springs, she found herself single and became a renter. She had just started to consider a move to northern New Mexico for a fresh start and more job opportunities when a house practically fell into her lap. “I wasn’t looking to buy a home,” she said, “it just came out of the blue.” A Realtor friend was home sick and browsing the newest real estate listings when she saw a home that would suit the woman perfectly. The price was right, it was the area she wanted to live in, and it was owner financed, a huge factor for her after a financial mess with the divorce. “I figured it was a good investment,” she said enthusiastically, “better than having my money sitting in the bank and me paying rent.”

Many local Realtors are seeing a trend of buyers seeking value. “One-hundred percent of buyers want a good deal,” said Dave Cammack, a Realtor in Pagosa Springs since 1992. “It’s a great time to buy, but not a great time to sell.” Cammack reported that April was the first positive month for home sales since last November, and many of the calls his office gets are buyers looking for foreclosures.

Realtor Lee Riley, noted that while a third of the current sales in Pagosa Springs are bank repossessions, two thirds of the sales are not. “It doesn’t make a whole lot of sense to build right now when the prices of existing homes are so good,” added Riley. “And if you’ve been waiting, you will start to pay more.”

Kim Moore, a Realtor in Pagosa Springs for 12 years, echoed Riley’s warning of prices changing. “Interest rates are going up,” she explained. “The rates are making a big impact in the market.” She noted an odd interest rate jump that caught the attention of Realtors and bankers on May 27. Moore said, “Interest rates went from 5.1 percent to 5.775 percent in just seven hours.” According to the local bankers she talked to, the rate hike followed no “normal” trend that would usually coincide with a market fluctuation or Federal Reserve announcement. The result of unsteady fluctuations: buyers who aren’t locked in on their rates can see their payments change considerably in just one day. That seven-hour change in rates on a 30-year loan of $200,000 would mean the a homeowner pays an extra $84 per month, or an additional $127 per month on a $300,000 loan.

When asked what homes people are looking for, Riley, Cammack and Moore all note a price range of $300,000 or less as being the best sellers, with the majority of most recent sales being under $200,000. Realtors are seeing buyers from states all over the nation, especially those hardest hit in the Northwest. Buyers have been investors, as well as people bringing home-based jobs with them to Pagosa Springs. According to Riley, the mix of buyers includes retiring couples, a lawyer from Albuquerque looking for a second home, and a Durango couple moving back to the area.

Realtors recommend that buyers become pre-qualified with a local lender. And just because a buyer is pre-qualified for a given amount doesn’t mean that’s what they have to spend on a home. “A good Realtor will determine the comfort level of the buyer,” Riley explained. “They can determine the buyer’s real needs and filter through unrealistic expectations.” In Pagosa Springs, factors to consider include maintenance costs and ever-increasing heating costs of homes. Riley shared the story of recent first-time homebuyers who were pre-qualified for a $169,000 loan. A great home was available for $155,000, well within their price range. The couple, however, chose to keep searching and closed on a smaller home that cost $125,000. The lower sale price meant lower mortgage payments, and the smaller size of the house meant less heating bills in the winter.

Local banker Carol Baker, a vice-president at the Bank of Colorado, is seeing changes in how people are purchasing homes, as well as staying in them. “Our mortgage division is swamped with refinances,” she reported, and although she has seen little change in loan criteria since her years with Bank of America before moving to Pagosa Springs, she notes people are being smarter about what they are financing. “The days of ‘no-doc’ loans are over,” Baker noted, referring to the practice of lenders allowing the borrower to state their income without documentation to back it up. “People are now more realistic about what they can afford.” She also adds that good credit and a steady employment history still go a long way to secure a loan with a good interest rate.

Although purchasing a new home as a permanent residence is a huge commitment, the 2002 homeownership proclamation that President Bush enacted also speaks to financial responsibility for existing homeowners and seeks to “encourage all Americans to learn more about financial management.

“Where homeownership flourishes, neighborhoods are more stable, residents are more civic-minded, schools are better, and crime rates decline,” President Bush stated when he declared June to be National Homeownership month. Whether a young, first-time homebuyer, or a long-time homeowner who is refinancing, the one thing all of these residents have in common is their commitment to live in Pagosa Springs and be a part of this unique community.

SUN photo/Natalie Carpenter
Lima Kneipple and her children, Shayla and Cyrus, are excited about moving into a new home, with a construction loan financed through a USDA direct-loan program that offers payment assistance.

SUN photo/Natalie Carpenter
Heidi Mueller has done a lot of the work on her new house herself, building sweat equity in the home constructed via the Colorado Housing Inc. program that has, to date, built more than 100 affordable homes in Archuleta County.