Housing advice: Stop renting; save money and buy a home

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Although not all homes for sale fit into the "affordable housing" category, occasionally the market offers the opportunity for someone to buy rather than rent. GWYNETH J. SAUNDERS

If you save money, you can buy a home. If you buy a home, you can save money.

When you think about having to fork over the first and last month's rent, plus a security deposit and deposits on utilities, you've likely found the same amount of money that you would need for a down payment on your own home.

Could encouraging home ownership be the solution to affordable housing?

Larry Stoller, broker-owner and Realtor with Real Estate Five of the Lowcountry, noted that "affordable" is relative.

"It has to do with mortgage rates. Everything in Bluffton is affordable to people moving here from up north because they're coming from a place where they are paying $14,000 to $15,000 in taxes," he said. "To them, everything here is affordable. The problem is, for people working here, nothing is affordable because they aren't making $50,000 or $60,000 or $70,000 a year."

It is possible to purchase a $100,000 condominium and pay a monthly mortgage fee that is less than the rent you might be paying.

For example, a friend's sons recently applied for and successfully began renting a luxury apartment in Bluffton for $1,760 a month. The base rent is $500 more than their parent's mortgage on their Hilton Head Island home.

"Right now, if you rent a two-bedroom condo in Westbury Park, you're paying about $1,200 a month," said Stoller. "At 4.5 percent interest rate, you could buy a condo for $100,000. You're paying maybe $800 or less with a 30-year mortgage, and that includes regime fees, insurance, etc."

That's more money in the owner's pocket, but it isn't easy.

Part of the problem is not only the cost, but the availability of both rentals and homes that are affordable and meet the needs of the workforce that local businesses require to maintain the county's reputation as a welcoming and livable resort.

There is a slight difference in the definitions of "affordable housing" and "workforce housing."

The Economic Times defines "affordable housing" as "housing units that are affordable by that section of society whose income is below the median household income."

The National Association of Realtors defines "workforce housing" as "housing that is affordable to workers and close to their jobs. It is homeownership, as well as rental housing, that can be reasonably afforded by a moderate to middle income, critical workforce and located in acceptable proximity to workforce centers."

On many of the real estate web sites - such as realtor.com - rental inventory in Beaufort County is currently fewer than 200 townhomes, condos, single family dwellings and mobile homes, including apartments.

The monthly fee - which did not include utilities, internet or TV - ranged from $750 to $4,800; only about 20 of them (as of June 18) were $1,200 or less per month.

The same sites also offered nearly 4,000 homes for sale, with posted prices ranging from $37,100 to $10,495,000. Out of those, about 520 were listed at $200,000 or less.

In an assessment of Hilton Head Island's workforce housing needs submitted in November 2018 revealed that about half of the island's 34,000 housing units did not have year-round occupants and were identified as vacant, which, according to the U.S. Census Bureau, are "intended for occupancy only during certain seasons of the year." Those island residents who do rent tend to double or triple the original occupancy in order to afford the payments.

Companies on Hilton Head Island have been addressing some of the workforce housing needs by renovating living spaces above businesses and in vacated office buildings.

The Richardson Group has created living spaces in two locations previously used as office space. One of these projects, at One Park Lane, converted an entire building, formerly occupied by Carswell Insurance, into living spaces for 38 people, with common kitchen and laundry facilities.

Bluffton has established a workforce homeownership program, offering assistance to income-qualified residents interested in purchasing a home through the Bluffton Home Series, pre-approved homes from one to four bedrooms, ranging in size from 600 to 2,300 square feet.

Town Councilman Fred Hamilton is a strong proponent of creating affordable housing in Bluffton, and said there have to be sacrifices from both ends of the spectrum to make it a reality.

"There has to be a buy-in from developers and elected officials, the municipalities and the county that says we have to be creative and not do business as usual anymore," Hamilton said. "In order for us to be successful at this, we have to come to the table with an open mind and be willing to compromise with each other and look at it from a partnership approach to build a sustainable community."

The councilman said there is currently opportunity for the town to partner with a developer who is requesting more density in order to build. At the June 11 council meeting, Village Park Homes LLC proposed to provide the land, build a mix of single-family homes and townhouses, put in covenants and make it affordable from 60 to 100 percent of the current Beaufort County area median income.

"That's 240 units across the development that will cover all of the working class that are in question - young professionals, teachers, firefighters, service workers," he said.

Wording seems to be the hold up at the moment, according to Hamilton.

"One of the things I experienced yesterday [at the town council meeting] that gives me some chills is that we keep dancing around what we're trying to accomplish - going from 'affordable' to 'workforce' to 'attainable' housing. We keep changing the wording to try to change people's opinion," said Hamilton. "The buy-in still is building a sustainable community."

According to a Beaufort County Housing Needs Assessment completed in May 2018, 32.5 percent of residents who rented had annual incomes of $25,000 to $49,999, and living in Beaufort County is not cheap.

On bestplaces.net - a website that researches, analyzes and produces demographic and geographic data - Beaufort County's cost of living is 114.3 on an average United States scale of 100. Housing is the biggest factor in the cost of living, and bestplaces.net rates housing alone at 159/100 versus South Carolina's overall rating of 84.7/100.

How much money is a household paying out of its income for housing?

According to the county study, cost-burdened households comprise 47.4 percent of the renters and 33.5 percent of the homeowners, both higher than the state average (45.7 and 23.1, respectively). Cost-burdened households are those whose housing costs more than 30 percent of its income.

When renters are paying 42 percent or more throughout the county, it is difficult to stash money away for a down payment on a mortgage.

How can people move out of that situation and into a home?

"If people would start the conversation, then they would realize that it's something that is most likely attainable," said Wendy Yeager, loan officer with Fairway Independent Mortgage Corporation. "My advice is just have a conversation with a mortgage loan officer before you even go look."

A good first step, Yeager said, is to get a credit report - available for free every year - by going to annualcreditreport.com. A credit score costs extra on most credit report sites, but the report will have a record of the individual's different accounts and the account payment history.

"Then we can start looking," Yeager said. "Are there issues that need to be addressed first and then do a loan later, or can we move forward? Credit is a major factor in obtaining a mortgage loan."

There are a number of home loan programs designed for first-time homebuyers that both Stoller and Yeager mentioned. Individuals might qualify for some or all of them.

The most recognizable programs are the Federal Housing Administration; U.S. Department of Agriculture for home buyers in rural areas; Veterans Administration for active duty and retired veterans; and Fannie Mae and Freddie Mac - two government-sponsored programs that offer conventional loans.

South Carolina State Housing Finance and Development Authority's (SC Housing) Homeownership Program also offers assistance to first-time homebuyers.

The U.S. Census Bureau's July 2018 American Community Survey revealed that the median income of Beaufort County residents was $60,603, meaning half the population earned that much or less, and 10.7 percent of the county was living at or below poverty level.

The Department of Health and Human Services 2019 guidelines report the basic federal standard of poverty is a family of four with a household income of $25,750. (There are variables that include Medicaid and other exceptions.)

"A lot of people who are renting have never bought before. There are a lot of programs around," said Stoller. "Get pre-qualified and pre-approved."

Gwyneth J. Saunders is a veteran journalist and freelance writer living in Bluffton.

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