Counteracting a declining housing market

by Keith Barber


Clement Little and Faith Kelley entered a house in the Scotland Ridge subdivision near the outskirts of Kernersville and took a quick tour of the two-bedroom home on Sept. 5. Little, a realtor, explained to Kelley — a potential first-time homebuyer —that the house was located in a neighborhood with a high foreclosure rate and has been included in 30 census tracts identified by the county’s housing department as being eligible for funds from the Neighborhood Stabilization Program. Created by the Housing and Economic Recovery Act of 2008, the Neighborhood Stabilization Program uses federal funds to protect the value of homes in neighborhoods with high foreclosure rates by rehabilitating abandoned or foreclosed properties and assisting first-time homebuyers with loans and grants to get into those homes. The federal government has disbursed billions of dollars through the program and North Carolina received $52 million for its share. Forsyth County and the city of Winston-Salem got $5.25 million for their programs designed to deal with the current housing crisis. The city and county have partnered with several nonprofits including the United Way, the Experiment in Self-Reliance, the Center for Home Ownership and Partners for Home Ownership in Forsyth County to create a program that county housing director Dan Cornelius has dubbed “the Affordable Home Delivery System.” “We’re blessed here in Forsyth County to have a lot of people on the demand side of home ownership,” Cornelius said. “We’re ahead of a lot of other places because we have the demand. A lot of municipalities are having to work from scratch to get people prepared.” Cornelius contrasted Forsyth’s program to the one implemented in Charlotte where the city buys up foreclosed properties without a program in place to cultivate first-time homebuyers. Cornelius described the Center for Home Ownership’s Individual Development Account program as an intense, 6- to 12-month training program that prepares first-time homebuyers to make the transition from renting to owning. The program, also known as IDA, has been a resounding success. It has assisted more than 370 Forsyth County families get into their first homes and suffered only seven foreclosures since the program began 10 years ago. “One of the easiest ways to create wealth is through home ownership, but you’ve got to do it right,” Cornelius said. Doing it right means setting strict criteria for qualifying homes and taking steps to ensure homebuyers can make their monthly mortgage payments. The program offers up to $20,000 for downpayment assistance and grant funding for rehabilitation and repair costs, Cornelius said. “We look at [a homeowner’s] debt to income ratio,” he said. “We don’t want people to be upside-down on their homes where they owe more than the house is worth. We want to make sure it’s affordable for them.” The county’s program also offers grant funding for renovationsand repairs on foreclosed properties. For example, a qualifying familywishing to purchase a $100,000 home could receive a $20,000 downpayment loan from the program, plus receive up to $10,000 in grantmoney for repairs and renovations “so there’s no lien on the house,”Cornelius said. Applicants get 30-year, fixed-rate prime mortgages at5.25 percent interest, and they are not required to pay back the$20,000 down payment loan if they stay in the home for 20 years.Beginning in the 11 th year of the mortgage, the loan is forgiven at 10percent a year. The home ownership rate in Forsyth County currentlystands at 69 percent, and increasing that number is crucial to morearea families building wealth and helping stabilize the county’shousing market, Cornelius said. “It’s still the American Dream forpeople who are involved in programs like the Center for HomeOwnership,” Cornelius said. “It’s the American nightmare for people whogot into subprime loans.” People paying as little as $600 to $700 a month in rent could be in ahome building equity under the Neighborhood Stabilization program, hesaid. “This is the best times and the worst of times for homeownership,” Cornelius added. “It’s the worst of times for people tryingto sell their home and the best of times for people looking to get intoaffordable homes.”

Thecity and county must disburse the $5.25 million by July 2010, but theprogram has been so successful that the county has applied to Housingand Urban Development for an additional $3 million. The county expectsto have an answer on its request later this year. Little said theprogram represents a golden opportunity for first-time homebuyers likeKelley. “We have numerous foreclosures here and with this program, we canminimize the inventory,” Little said. “It’s going to be a great programfor everybody — it’s going to be a win-win.” Scotland Ridge is a 7-year-old subdivision with 34 homes built in thesoutheast corner of Forsyth County. Homes started in the $130,000 rangewhen the subdivision was originally constructed in 2002, but highforeclosure rates have brought prices down significantly, Little said.The home Kelley toured on Sept. 5 could be purchased for less than$100,000. “It’s a bargain for this neighborhood,” Kelley said. “It’s a lovelyneighborhood. I have friends that live out here — this is aneighborhood I would definitely live in.” At the moment, Kelley, whoworks for the Winston-Salem Transit Authority, is scouting threeneighborhoods in the county for a suitable home. Kelley resides in anapartment complex on the north side of Winston-Salem with her threechildren, who range in age from 8 to 13. Kelley said making thetransition from renting to buying means as much to her children as itdoes to her. “They’re wonderful children that are very excited aboutbeing in their own home,” Kelley said. “I prefer for them to be in abetter neighborhood.” Kelley sends her children outside of their school district — to BoltonElementary and Wiley Middle schools in the West End Historic District —to ensure they get a quality education. Standing inside the living room of the foreclosed home, Kelley, 33,observed how peaceful the neighborhood seemed, and remarked how itwould be a safe place for her children to live and play. Kelley saidshe feels confident she can qualify for the Neighborhood StabilizationProgram.

“Ijust need the financing,” Kelley said. Cornelius said the financing isthere for Kelley and the more than 200 Forsyth County familiescurrently enrolled in the county’s IDA program. The good news forhomeowners looking to participate in the federal program is the incomerequirements are not as stringent as those for the IDA program. Thefederal funds can be disbursed to individuals or families who earn 120percent of the median income for the county — which translates to$70,000 a year for a family of four. Little said local governmentagencies working in tandem with local nonprofits to give low interestloans to potential homeowners is one of the most enlightened ways tostabilize the area’s housing market, and the ripple effect of theprogram will be felt in every sector of the county’s economy. “I think [the housing market] is the driving force in the economy,” hesaid. “When the housing market does great, the economy does great. Ifwe’re able to stabilize this housing market and see an upswing, we’regoing to see unemployment decline, people will be out spending moneyand I think you’ll see a tremendous change.”

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“It’s a lovely neighborhood. I have friends that live out here — this is a neighborhood I would definitely live in.”

Faith Kelley (left) plans to utilize the Neighbirhood StabilizationProgram, created by the Housing and Economic Recovery Act of 2008, as ameans of obtaining her first home. This one, near the outskirts ofkernersville, is in a neighborhood with a high forecolsure rate. (photoby Keith T. Barber)