Steeper prices and competitive buyers are raising
the bar
September 7, 2004 ; As originally appeared in Stamford Advocate,
by Julie Fishman-Lapin
For
many people in lower Fairfield County, attaining the American
dream is just that -- a dream.
From
young middle-class families looking to buy their first home
to aging baby boomers who have seen property taxes appreciate
along with their houses, living on Connecticut's Gold Coast
has become at best a challenge. For many, it is unattainable.
The
problem isn't limited to the wealthy enclaves of Greenwich,
New Canaan and Darien, where the cost of housing has historically
been high. Prices have climbed in those towns, but the cost
of homes in surrounding cities -- traditionally more affordable
-- has skyrocketed.
"It
has changed tremendously. . . . The prices have gone through
the roof," said Phyllis Doonan, a real estate agent in
the Stamford Bedford Street office of William Pitt Real Estate.
"Years
ago, speaking of a half-million dollars, you would think you
were getting it all," Doonan said. Now, she said, half
a million dollars will barely get you a condo in Greenwich
or a small fixer-upper house in Stamford.
Doonan,
who sells homes in all of lower Fairfield County and was the
top seller in her company last year, said she spends a lot
of time educating her clients about what they can get for
their money.
It's
a harsh lesson that Doonan must impart: Buying a home for
less than $500,000 in lower Fairfield County is virtually
out of the question.
Big
demand, small supply
Add together the real estate maxim about "location, location,
location" with that most basic law of economics -- supply
and demand -- and you have the foundation for the high cost
of local homes. A lot of people want to live here, but the
area lacks affordable dwelling units to accommodate them.
"The
costs have gone up tremendously because of supply and demand,"
Doonan said.
Reasons
for the huge demand are many: good schools, lower taxes than
Westchester County, express trains to high-paying Manhattan
jobs, the beautiful countryside.
And
many who want to live in lower Fairfield County can back up
their desire with money.
The
willingness of high-income earners to pay a premium has all
but shut moderate-income earners out of the housing market
in such places as Greenwich, New Canaan, Darien and Wilton.
While they may be able to afford a condo in Stamford or Norwalk,
buying a single-family home in these cities has become almost
impossible.
The
term "affordable" has changed, Doonan said. It's
not how much you can pay, but how much you have to pay.
The
new generation
It's a particularly vexing problem for one group with a great
reason for wanting to live here: the children of area residents.
Scott
Carson not only works in Stamford, he also grew up here. Carson
and his wife, Dawnya, have been looking to buy a house in
lower Fairfield County for three years.
"If
you are a young couple making $80,000, you've got an issue,"
said Carson, who had hoped to raise his family here.
He
and his wife make a good living but were pumping so much money
into rent they couldn't save enough money for a substantial
down payment.
The
Carsons turned to the Housing Development Fund of Fairfield
County, which helps moderate-income families buy homes and
developers build low-cost housing.
Executive
Director Joan Carty said her organization and its affiliate
program, Adopt-A-House, do not cater just to low-income home
buyers anymore. The two organizations increasingly are coming
to the aid of moderate-income house hunters as they struggle
to buy homes in the area.
Teachers,
police officers, nurses and nonprofit employees are just a
sampling of the professionals who come to them for help. In
June, three of the Housing Development Fund's clients were
firefighters, and two were college professors.
"These
are people who so desperately want to stay in the city where
they work," said Betsy McGroarty, executive director
of Adopt-A-House, a nonprofit that assists first-time home
buyers with down payments and closing costs.
Those
are big hurdles for many people, Carty said. They may have
the income to live here, but because they are paying so much
rent, they can't save enough for the down payment and closing.
That's
why the Housing Development Fund launched its assistance program.
The agency will launch a second mortgage program in which
first-time home buyers can borrow up to 20 percent of the
purchase price and pay the loan off at 3 percent interest
over 20 years.
The
program will link first and second mortgages, lessening the
amount buyers will have to borrow on the first mortgage. That
will enable buyers to avoid private mortgage insurance, which
is mandatory if the down payment is less than 20 percent of
the home's cost. The insurance protects the lender from defaulting
borrowers.
The
first step
Unlike some people he knows, Carson said he refused to take
on a mortgage he couldn't afford.
"What
is the point of paying a $2,500-a-month mortgage if you can't
eat?" he said.
A
home is considered affordable if the monthly costs add up
to no more than 30 percent of household income, McGroarty
said. Costs include principal and interest, homeowners insurance,
taxes, private mortgage insurance and condo common charges.
"The
reality is, of course, that many people are paying much more
than 30 percent," she said. "A lot of people are
paying 50 (percent) or 60 percent of their income."
The
Carsons weren't willing to live like that. Ironically, it
wasn't until Dawnya lost her job that they could buy a home.
Their reduced income qualified them for down payment and closing
cost assistance from Adopt-A-House.
With
help from the organization, the Carsons closed on a co-op
in Stamford at the end of May.
"This
is not what we really wanted, but you've got to start somewhere.
The longer you wait, the worse it is," Scott Carson said.
The
Carsons acted wisely, observers say.
"The
best option is to get into whatever they can afford to get
into," Doonan said. "They can't be too choosy. Income-challenged
buyers can start small, build some equity and then upgrade
to a bigger condo or town house. Then, in a couple more years,
they can use that equity to maybe move into a house."
It's
a mistake to wait with the hope of saving enough to put a
down payment on a dream house, Doonan said.
"Get
into the market as soon as possible," she said. "Don't
wait and say, 'I'm going to raise $20,000.' The equity of
a house will grow faster than you can save that money."
Retirement
living
Rising housing costs affect more than just young couples starting
out, Carty said.
"It's
pervasive. It is affecting many income levels in different
sectors," she said.
For
many who live here, it hits them when their adult children
can't afford to move to the area or even close by, McGroarty
said.
During
the August 2003 blackout, it took many emergency workers hours
to get to their posts in Stamford, Carty said. Most city emergency
workers had gone home for the day, and had to fight their
way back through miles of crushing Interstate-95 traffic.
In
the winter, after a snowstorm, schools are closed not because
kids can't get there, but because teachers can't, she said.
"It
resonates in a lot of ways," Carty said.
Her
concern is not only for young first-time home buyers, she
said, but also for aging baby boomers. Taxes are going up,
and they can't afford to stay in the home they've lived in
for 30 or 40 years.
"We'd
like to see more housing options for people who want to downsize
but stay in the community," Carty said.
It's
a problem that Evelyn Kahn, a real estate agent in Greenwich
since 1974 who works for Sotheby's International Realty, sees
quite often.
"Condos
have appreciated significantly," Kahn said. "It's
a real dilemma for people who want to scale down and stay
in town."
Seniors
once moved to a complex such as Lyon's Farm in Greenwich --
a favorite location for people starting out or scaling down.
When the condos were built in the 1970s, units sold for $99,000.
Now those same condos are selling for $1.2 million to $1.5
million, Kahn said.
New
homes rarely are built with first-timers or downsizers in
mind, she said. Builders are aiming for those who trade up.
"A
lot of new construction we are seeing now is addressing that
market," Kahn said. Virtually all newly constructed town
houses and condos in Greenwich are selling for $1 million
to $2 million.
Downsizing
seniors sometimes have to trade in the $1.2 million house
they have owned for 35 years for a $2 million town house,
she said.
Finding
the same frustration as those entry-level buyers, they too
are relocating farther away.
Kahn
said people are moving up the line to places such as Shelton
and Trumbull, with the hope of one day building enough equity
to return to lower Fairfield County.
Another
popular option for people who don't want a a small condo or
a long commute is to purchase a multifamily home in town and
use the rent to help cover the mortgage, Kahn said.
Some
who have a down payment and know they are not going to be
in a home for more than a few years play the leverage game
with an interest-only mortgage and its lower monthly payment.
With luck, they'll both save money and make a profit.
"Ninety
percent of my buyers use interest-only mortgages," Doonan
said. "The value of a house is going up much faster than
the interest rate."
'Not
talking deluxe'
So
just how much money does it take to live around here?
Kahn
did a quick analysis of what it would cost to live in the
two least-expensive housing units listed on the market in
Greenwich at the beginning of June.
In
that month, when inventory is typically high, the lowest-priced
housing unit in Greenwich was a studio apartment for $299,000
for, she said.
If
someone were to put 10 percent down -- about $30,000 in cash
-- and take out a $270,000 mortgage, he or she would need
an income of $70,000 to afford that studio.
The
least-expensive single-family home was a 1,100-square-foot,
two-bedroom home for $575,000. The buyer would need $58,000
cash for 10 percent down payment and an income of $150,000
to make the payments on a $520,000 mortgage.
"We
are not talking about deluxe houses," Kahn said. "As
far as staying in town, it is a challenge."
The
Multiple Listing Service, a compilation of most homes on the
market, had no listings under $300,000 in New Canaan or Wilton
in June. Stamford did not have any houses below $300,000,
but did have several condominiums under that price. Norwalk
had three houses ranging from $245,000 to $280,000. Like Stamford,
it had a number of less pricey condominiums.
Today,
for a single-family house that doesn't need a lot of work
in Stamford, "You are definitely looking at starting
in the 400s. From $400,000 to $600,000 is affordable for here,"
Doonan said.
It's
the reality of the market, Carty said, that Lower Fairfield
County is the third most expensive housing market in the country
behind San Francisco and San Jose, Calif.
"We
really do have a problem in the nation. It is not just our
part of Fairfield County that has a problem," she said.
But
there's no doubt we feel it acutely. "We are ahead of
the curve because we are the thirdcostliest market,"
Carty said.
Along
with steeper prices, the market also is getting more competitive,
Doonan says.
"The
serious buyer is on the Internet at 3 in the morning. They
know exactly what they want, what neighborhood they want to
be in. They want to be the first to know when a new listing
comes to the market," she said.
She's
seen bidding wars over condos in Stamford that sell for $300,000
and up -- the same condos that Doonan sold 10 years ago at
$60,000 or $70,000.
The
hunt goes on
Though he and his wife finally purchased a place to live,
Carson said his search to buy a single-family home is not
over. But it's not taking place in Stamford.
Like
many young couples, the Carsons look at their new co-op as
a starter home -- a way to build equity so that they can eventually
buy a house to raise their three children in.
"We
are planning to buy a house. We want it to be here. But realistically,
it won't happen," Carson said.
The
couple paid $170,000 for their co-op. "If I sold it for
$250,000, what can I buy? I don't want to double my mortgage
in four years just to buy another condo," Carson said.
"Unless
some major cash flow hits me, I'm going to move out of here.
That's pretty sad," he said.
Carson
said he plans to live in his new co-op for a few years, do
some remodeling and put it on the market. Then he will likely
move his family to Maryland, where his brother purchased a
2,300-square-foot, four-bedroom house for little more than
Carson's two-bedroom apartment.
It
won't just be Carson, his wife and three children leaving
the area. His parents, who own a home in Norwalk, will move
as well.
"We
have the only three grandkids. They are retired. When we leave,
they will leave with us," Carson said.
Copyright
© 2004, Southern Connecticut Newspapers, Inc.
|
