…

[SDEaves]

…

[bearishgurl]

Would the five “affordable units” in the complex be set aside for rent … or for sale at a lower price to qualified individuals/families?

And is the complex brand new construction or a condo conversion from a former apartment building?

[SDEaves]

The affordable units would be for sale only, just at a lower price to income qualified individuals/families.
The complex is brand new construction.
Bad investment? Do you think those units will affect resale value of regular units? Other potential pitfalls you may know of?

[bearishgurl]

[quote=SDEaves]The affordable units would be for sale only, just at a lower price to income qualified individuals/families.
The complex is brand new construction.[/quote]

Okay, how MUCH lower of a price are the low income units selling for than the market (i.e. 20% 25%, etc)? For the first year that the project is sold out, the market rate buyers will have these lower sold comps to for any prospective sellers to contend with.

If the buyers buying the five low-income units are allowed to sell whenever they want to (have no “length-of-holding” clause in their contract) and they are limited to find buyers who fit the low income criteria as well, then there may be a stray “low-income sold comp” from your complex for you to contend with when you want to sell.

If the buyers buying the five low-income units today are not allowed to sell for, say five years or more and you know you won’t hold the property for that long, then you will not have to contend with these (lower) sold comps during the time of your ownership if you can successfully sell when you want to.

Currently, you have only 5.5% of units selling at a lower price.

How much would the mo HOA dues be? And does the project have MR, and if so, for how many years?

And … sorry to be repetitive, but are you absolutely positive that it is all brand new construction from the ground up?

[SDEaves]

These income-qualified units are being sold for 20 percent less than regular sale units.
No holding clause but they would only be able to resell their unit to another income-qualified person/family.
When you go to sell your regular unit, would those affordable housing comps be excluded from comparison to the regular sale?
Seems like there should be some special provision to protect regular resale but not sure?

[bearishgurl]

I am unaware of any appraisal standards which would preclude CA appraisers from using the “low-income” comp as a sold comparable to appraise the exact same market rate unit in the same complex. Of course, the listings of the low income units would state that they can only be sold to income-qualified buyers.

Will the low-income owners in the complex have to re-sell in the future at 20% less than “the current market” (whatever that turns out to be)? If so, how is their resale listing price determined? And who determines it? Are they allowed to make a profit upon sale?

I am not an appraiser (any Piggs??) but have taken the CA RE Appraisal course.

[bearishgurl]

Even though its only five units, depending on how much their carrying costs are (PITI + HOA + poss MR), I just feel that the buyers of the low-income units will be more vulnerable than the market-rate buyers (ie forced to sell or walk away). These carrying costs added up together are FAR MORE than if the low-income buyer was simply a tenant.

If the five units were going to be occupied by tenants renting from a local housing authority or agency, I would opine that these units won’t affect either the marketability OR resale-ability of the market-rate units. In coastal CA counties, these rent-subsidized tenants seldom cause ANY kinds of problems because they would be in danger of losing their (lifetime) voucher upon eviction. Thus, depending on location, they will likely remain for many years.

[bearishgurl]

I just pm’d Pigg UR on your behalf to respond to this thread. There are a few newer bldgs in his stomping ground (ex: East Village) which had a few low-income units for sale when the projects were new.

Perhaps enough units have resold in these projects to be able to answer your question.

[urbanrealtor]

[quote=SDEaves]These income-qualified units are being sold for 20 percent less than regular sale units.
No holding clause but they would only be able to resell their unit to another income-qualified person/family.
When you go to sell your regular unit, would those affordable housing comps be excluded from comparison to the regular sale?
Seems like there should be some special provision to protect regular resale but not sure?[/quote]

Re resale:
Typically, the units I have dealt with, have a 40 year deed rider that ties the resale value of the property to the median county income. That means that if values spike, you sell at the income-defined price (which would be below market). Likewise, if the values tank, you sell ABOVE market (or, rather, fail to sell).

In other words, you have all the risk of being a homeowner with virtually none of the rewards (except static cost of housing). Without some speculative potential reward, there really is not a huge incentive to buy.

Re appraisal:
By definition, the affordable units are not open market sales. However, not all appraisers know about this program and not all listing agents mention it in the remarks. Therefore, I have had multiple appraisals plopped on my desk when my loan officer (who has the desk next to mine) says “What the fuck is this?!!!”.

In other words, it shouldn’t affect normal sales but in practice it does because the deed riders and restrictions don’t show on databases as they should.

I am a liberal and a believer in government helping the less privileged.
This is not an example of that help.
This is a terrible program and only will cause hurt to owners.
Avoid it.

[bearishgurl]

[quote=urbanrealtor][quote=SDEaves]These income-qualified units are being sold for 20 percent less than regular sale units.
No holding clause but they would only be able to resell their unit to another income-qualified person/family.
When you go to sell your regular unit, would those affordable housing comps be excluded from comparison to the regular sale?
Seems like there should be some special provision to protect regular resale but not sure?[/quote]

Re resale:
Typically, the units I have dealt with, have a 40 year deed rider that ties the resale value of the property to the median county income. That means that if values spike, you sell at the income-defined price (which would be below market). Likewise, if the values tank, you sell ABOVE market (or, rather, fail to sell).

In other words, you have all the risk of being a homeowner with virtually none of the rewards (except static cost of housing). Without some speculative potential reward, there really is not a huge incentive to buy.

Re appraisal:
By definition, the affordable units are not open market sales. However, not all appraisers know about this program and not all listing agents mention it in the remarks. Therefore, I have had multiple appraisals plopped on my desk when my loan officer (who has the desk next to mine) says “What the fuck is this?!!!”.

In other words, it shouldn’t affect normal sales but in practice it does because the deed riders and restrictions don’t show on databases as they should.

I am a liberal and a believer in government helping the less privileged.
This is not an example of that help.
This is a terrible program and only will cause hurt to owners.
Avoid it.[/quote]

Ah, the Piggs thank you, UR, for your predictably wise “in-the-trenches” counsel on this rather “thorny” subject. As I suspected, what happens on the street and what should “theoretically happen” are often night and day from one another 🙂

*************************************

SDEaves, I take it you did not purchase the SFR’s, PUD or the Tierrasanta townhome you were considering back in October:

http://piggington.com/townhouse_close_to_work_or_house_in_the_burbs

and when the Piggs tried to help you get clarity then:

http://piggington.com/for_piggs_with_kids_what_would_you_rather_buy

… you never let us know the outcome of which type of housing you actually decided on ;=]

The fact of your price range being ~360K was the catalyst which led you to a project such as the one you viewed over the weekend, IMHO. This sort of implies that you are leaning towards any new construction which could be found in your price range.

Since you stated you have been looking for a residence for more than a year, would you mind filling us in on the results of your recent search since your last threads? 🙂

[SDEaves]

BG,
Just as you said last month, homes in our price range are getting snatched up by cash buyers.
Since last month’s post, we have put in 2 offers in LM but to no avail. One was taken by an investor; the other we were outbid.
We are still searching. As you and other Piggs have said, inventory is extremely low in our price range. So this all should come as no surprise to you 😉 Your last post implies some sort of impatience at us taking our time with buying and asking questions in the meantime. Perhaps I read into your last post wrong? We will gladly update you once we close escrow on a home. Please send us good luck with our search- we need it!

[bearishgurl]

[quote=SDEaves]BG,
Just as you said last month, homes in our price range are getting snatched up by cash buyers.
Since last month’s post, we have put in 2 offers in LM but to no avail. One was taken by an investor; the other we were outbid.
We are still searching. As you and other Piggs have said, inventory is extremely low in our price range. So this all should come as no surprise to you 😉 Your last post implies some sort of impatience at us taking our time with buying and asking questions in the meantime. Perhaps I read into your last post wrong? We will gladly update you once we close escrow on a home. Please send us good luck with our search- we need it![/quote]

Glad to hear you have been actively placing offers, SDEaves. The reason of my mentioning that you stated on your previous thread that you took a year to “look?” is because that is a very long time to simply “look” while interest rates are inching lower and lower, thereby increasing your competition. Perhaps you also placed (unsuccessful) offers during that time frame but my understanding was that you didn’t and were just “looking.”

I stand by my prior recommendations for you of SFR’s in LM, LG, Lakeside, Santee, and even Spring Valley (now on the SR-125). As a family of five with three small children, you don’t have to accept a condo today. With a condo, even in the absence of low income units, your future saleability and future sales price is largely out of your control. These factors are in the control of your neighbors in the complex, the quality of construction and most of all, the HOA. If you buy a condo now, you will invariably grow out of it and may not easily be able to sell. Even if you CAN successfully sell and recover all or most of your DP, you will then have to qualify to purchase the same SFR’s you are looking at today at a higher price. You stated your family is not a “dual income” family.

The type of residential market we’ve had here in the past 18+ months is the type where buyers (ESP those in your price range) must be willing and able to immediately act and have your counter offer figure at the ready in case there is competition for the property. You can sort out the condition of the property later in escrow with an inspection contingency. The only way I see that you can initially lose out this way is if the property is an obvious “heavy fixer” (which you would not likely place an offer on, anyway) and cash investors waiving the inspection contingency are flocking to it. This doesn’t typically happen today unless there is a LOT of potential “sweat equity” in the property due to its “location.”

If I was in your shoes and had to choose a daily commute of equal distance using the SR-52 or SR-125, I would consider those communities along the SR-52 first. The SR-125 is much more crowded because it now comes from the int’l border (its toll road ceases at SR-54). HOWEVER, the properties in your price range will have more “curb appeal” (likely have older, raised foundations) in LM and LG. Lakeside DOES have some properties like this, but many of them have split-level backyards (which you might like – they are “horse properties”).

If you will continue to look and place offers in the areas I have just mentioned again here, I don’t believe you will run up against as much competition as you have been. These areas are favored by individual buyers who grew up there and also for their larger lots with more liberal zoning. You won’t be running across these hundreds of “dual-income parent” buyers from somewhere else who are primarily looking for a “lifestyle” as you may have been in the past. You will hopefully instead land a good solid home with room for possible expansion that would last your family for many years.

JM2 cents … and the best of luck on your search, SDEaves.

[EconProf]

This program is a wonderful example of what happens when the local government interferes with the natural outcomes of the free market. In this case, five out of ninety buyers get a 20% break on the purchase price. The initial impact is a slightly higher price for the other 85, since the developer has to spread the discount among the other buyers.
That should only amount to a $5000 bump to their price. But with the “cloud over the title” that has been described, the hit to future values upon resale is unknown, and could be much more. Knowlegeable buyers will steer clear, thus hurting prices and costing the developer an unknown amount.
So the government manages to cost the vast majority of buyers much more than the subsidy to the lucky few poor families who get to buy, who, by the way benefit little in terms of future appreciation. The developer is forced to do this in order to get permission to build to satisfy local housing activists (and I believe to get higher densities), and politicians get to claim they are doing something to lower housing costs. And the few buyers that are helped are a tiny fraction of the needy population. Net net society as a whole loses far more than it gains.
We could lower housing costs far more efficiently by removing silly barriers to growth that local governments erect.

[urbanrealtor]

[quote=EconProf]This program is a wonderful example of what happens when the local government interferes with the natural outcomes of the free market. In this case, five out of ninety buyers get a 20% break on the purchase price. The initial impact is a slightly higher price for the other 85, since the developer has to spread the discount among the other buyers.
That should only amount to a $5000 bump to their price. But with the “cloud over the title” that has been described, the hit to future values upon resale is unknown, and could be much more. Knowlegeable buyers will steer clear, thus hurting prices and costing the developer an unknown amount.
So the government manages to cost the vast majority of buyers much more than the subsidy to the lucky few poor families who get to buy, who, by the way benefit little in terms of future appreciation. The developer is forced to do this in order to get permission to build to satisfy local housing activists (and I believe to get higher densities), and politicians get to claim they are doing something to lower housing costs. And the few buyers that are helped are a tiny fraction of the needy population. Net net society as a whole loses far more than it gains.
We could lower housing costs far more efficiently by removing silly barriers to growth that local governments erect.[/quote]

Amazing.
You frame your arguments with sufficient partisan vitriol that I need to re-think my positions every time you agree with me.
I am also glad that you agree.

[EconProf]

UR: Just trying to analyze the economic and societal impact of the policy, and was building upon your thorough description of its mechanics. Would be interested to know your thoughts on my interpretation.

[Author]

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