Sue Thompson, Owner, HomeTown Realtors
September’s average home sale price in the greater Auburn area is approximately $426,000. When you take a look at that from a financing perspective, 20% down if you went conventional, which is roughly $80K and which, if you have no debt, will require a minimum of $52K annual income. That’s with good credit and no debt. That means no car payments, no credit card bills and that’s, of course, dealing with one-third of your monthly income for your mortgage payment. That makes it pretty tough for entry-level buyers.
Affordability will continue to be an issue unless we have new construction adding to our housing stock. Even then, the high development and permit fees will make the cost of new homes even higher.
We see the demand for less than $400K but the problem is when it comes up it goes quickly, typically with multiple offers. That’s really hard to deal with for the average home buyer and if one doesn’t have cash it makes it even more difficult. In fact, a lot of people who are competing at that lower range (which used to be the upper range) they’ll even sign away their inspection contingencies when they submit their offer—just to be considered.
The fee structure is a key aspect to encourage developers to build more affordable, lower cost homes. Depending on where and what kind of utilities, somewhere between $40K to $80K in fees is required before you even drive one nail. That’s huge.
The development costs are also a concern. Let me give you an example. I was asked to do a study on a piece of property that was sub-dividable to see what had to be done—how much it would cost—to sell two properties instead of one. And my research found that it would cost close to $200K before you can get two parcels out of that—which includes required reports plus engineering and other fees that all added up (hard and soft costs). And the property itself would probably only sell for $200K anyway.
The people are ready, but our local government is not. The current building/development model is not relevant anymore – it’s behind the times and not current with the changes in the economy and in society. The system itself is working against the best interests of what we’re trying to accomplish for the people at large.
One example is the ordinance on second dwellings—where you cannot rent out a second dwelling on your property unless you live on the property. These things need to change.