You can buy a home…maybe

“Participating homebuyers may be able to put down as little as one percent of the purchase price because of SmartMove New York’s low-interest loans.” Sounds too good to be true? If you have good credit and don’t have too much income, it isn’t.

SmartMove New York is a three-percent-interest second mortgage for up to 20 percent of the purchase price of a home that, combined with other down-payment assistance, can help cover closing costs. A free homeowner information session is scheduled for Wednesday, December 12, from 6 to 7 p.m. at Rupco’s Kirkland Building at 2 Main Street in Uptown Kingston.

This expansion of access to affordable housing through SmartMove New York is the result of an innovative local partnership among the non-profit Housing Development Fund (HDF, which “envisages a future where all households…have access to the benefits of stable, affordable housing”), financial institutions (locally Ulster Savings Bank and M&T Bank), and Kingston-based Rupco, which will provide education, counseling, financial advice and other support.

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A lending consortium of participating banks form a pool to share the risks of the three percent-interest second mortgage loans HDF makes. The banks spread the risk on a pro-rate basis, said Kelly Almanzar of HDF. 

According to Kathy Germain, vice-president of housing services at Rupco, applicant income needs to be no more than $63,360 for a two-person Ulster County family, $79,200 for a four-person family (income numbers are revised annually). Ulster Savings Bank has committed a million dollars in capital to the risk pool. USB senior vice-president Joan Eck, who was instrumental in developing the program locally, said the historical default rate for the loan program has been very low.       

Renowned investor Ken Fisher, number 200 on the Forbes list of the 400 richest Americans, wrote an article this past February in USA Today contending that homeownership was a lousy investment. He got strong negative response from his readers. “I may as well have spit on motherhood, apple pie and the girl next door,” lamented Fisher in a follow-up story in March. 

Fisher stuck to his guns, however. “Folks believe owning is cheaper than renting,” he wrote, “and think that mortgage payments transfer wasted rent into an investment.” He said such folks were wrong. Because most homeowners move before much of their mortgage payment applies to equity (the average is ten years), Fisher argued, it’s the lenders that get most of the money. Folks may as well rent.

Homes are wonderful, conceded Fisher. “Owning means never worrying about eviction, rent increases or many fears readers cited,” he concluded. “But those advantages are separate from investment wonders, despite what many people fool themselves into believing.” 

Writing in City Lab on August 28, social theorist Richard Florida worried about the effect of home ownership on political attitudes. Homeowners became more politically involved, he wrote. Those who had private mortgages tended to become Republicans, where those with federal (FHA) loans were more likely to lean Democratic. Homeowners tend to act to protect the value of their own homes, paradoxically increasing social inequality through policies that “may help to reinforce the gap between more affluent and advantaged homeowners and the rest of American society.” As a key constituency of not-in-my-back-yard (NIMBY) resistance to social change, Florida warned, they can help exacerbate social inequality.

The United States Census Bureau just came out with third-quarter 2018 national numbers on asking prices for vacant for-rent and for-sale housing units. The asking price for a median rental was $1003 a month. The median asking for-sale price was $206,400. The rental vacancy rates were highest outside metropolitan areas. The homeowner vacancy rates, which hadn’t changed much from the previous quarter, were lowest in the suburbs. 

Though considerably lower than its peak in the last quarter of 2004 at 69.2 percent, the most recent national homeownership rate had increased from its low point of 62.9 percent in the second quarter of 2016 to 64.4 percent. The homeownership rate is on the increase again.

The asking rental rate has been on a slow but steady rise since the current Census Bureau statistical series began recording it in 1995. The asking sales price has been much more volatile, rising rapidly from about $79,000 in 1995 to peaking at $200,000 in 2007, dropping dramatically to $140,000 three years later, and then climbing back slowly, regaining its previous peak in the most recent quarter. 

When one looks at the entire 1995-2018 cycle, one finds that the median asking price of rental units and for-sale units have each increased by about two and a half times. The main potential advantage to owning, Ken Fisher notwithstanding, is the accumulated equity over the long haul. The rich man is likely to have many assets. The poor man is likely to have only one, his house.

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