Despite it’s laudable goals and a well-intended blog post today in Boston.com, my sense is that the First Look program in Massachusetts, particularly in Boston, is a dead end, not a lifeline. Beyond the dearth of inventory in MA is the depth of renovation necessary. Admittedly, the photo above — from a controversial story in PolicyMic about Flint, Michigan that we blogged about yesterday – is an exaggeration to make a point.
My notes from Foreclosure Task Force chaired by CHAPA.org on March 5, 2012, revealed that at that homebuyers passed on 9 of 10 First Look properties across Massachusetts because they needed too much rehab work. It was not clear to me whether that was because of the complexity of renovation or the buyer’s inability to finance the improvements by combining multiple subsidies. Unlike some other states, HomeSteps financing does not appear to be available in MA.
Nationally syndicated columnist Ken Harney wrote that, “HomePath listings that need some fix-up may also be eligible for “renovation mortgages.” But a closer look at HomePath’s web site reveals those “loans include both the funds for the purchase and renovation — up to 35% of the as completed value, no more than $35,000.”
My notes from the 2012 meeting say that the average rehab cost in MA was $67K, or nearly DOUBLE the financing available from Fannie Mae.
However, that does not necessarily mean that these affordable housing opportunities are necessarily lost to investors. As noted on Fannie Mae’s description of First Look, the program is also open to public entities and their partners, and some non profits. Massachusetts has an extensive network of community-based housing development corporations. My sense is that those organizations have the track record and ability to tap into Neighborhood Stabilization Program (NSP) funds necessary to undertake rehab.
Perhaps one of those organizations can update us on the current status of the programs in MA, and other affordable housing alternatives for first-time homebuyers and owner occupants. Also invite any buyer agents who specialize in First Look properties to clarify my admitted limited knowledge of these programs in MA, particularly ways to finance rehab through multiple funding sources.
Lifeline or dead end, it is essential to take a second look at First Look and the underlying problem it seeks to address. As Ken Harney writes:
“All-cash purchases of homes hit a high mark last month,” and
“A stunning 42 percent of all residential sales nationwide went to buyers who paid cash.”
Should affordable housing advocates create programs to compete with cash buyers, or fear what will happen when the economics of investor purchases flips, causing both demand and property values to fall?