It's a bad time for first-time buyers in Walworth County
(Published Saturday, September 15, 2007 01:38:51 AM CST)
A d v e r t i s e m e n t
By Chris Schultz/Gazette Staff
WALWORTH
Around the country, housing prices are stagnating and property values are dropping as the numbers of mortgage foreclosures and home loan defaults continue to rise.
But in Walworth County, property values are rising.
That's good news for investors but bad news for average families seeking their first homes.
Travis Egan, mortgage lender for Community Bank Delavan, said he consistently sees Walworth County property values dash the dreams of would-be homebuyers.
Median income nationally is between $30,000 and $45,000, Egan said. Median income means as many make more as make less.
Starter homes in Walworth County are at $150,000 or more, Egan said. And to afford a $150,000 house, a family needs to make more than the median, he said.
"You have to make nearly $60,000 a year to afford a starter home in Walworth County," Egan said.
Assuming no money down, a 30-year fixed-rate mortgage, and staying within a 28 percent limit on housing costs, a family of four would need an income of $57,662 to comfortably meet the monthly payments of $1,340, Egan said.
"People's rate of pay have not kept up with the increase in housing costs," Egan said.
Three years ago, starter homes were in the $120,000 to $130,000 range. Now, that same property sells for $150,000 to $160,000, Egan said.
The typical Walworth County starter is 50 to 70 years old with some kind of minor deferred maintenance, such as needing paint or carpeting, Egan said. It's relatively small, between 1,200 and 1,500 square feet.
New homes being built in Walworth County go between $200,000 and $275,000 and are usually larger, he said.
Community Action Inc., a social service agency serving Walworth and Rock counties, tried to create affordable housing in Walworth County in 1997, said Julie Zaukas, Community Action program director.
The agency built four homes for $100,000 each in Turtle Creek Subdivision in Delavan. The houses had three bedrooms, two baths and full basements, Zaukas said.
Buyers had to meet income guidelines, and the agency provided each buyer with a $20,000 delayed payment, no-interest loan to bring mortgage costs down even lower, Zaukas said.
Within one year, valuation of those houses had increased to $135,000. Now, they're each worth at least $170,000, well out of the range of the median income family, Zaukas said.
"Now, those people couldn't afford those houses," Zaukas said.
Several years ago, Community Action thought about repeating its affordable-house-building project but had to give it up. The cost of buildable urban lots increased from about $18,000 in 1997 to $30,000 and more, putting them out of the agency's reach, Zaukas said.
Overall, the median value of houses in Walworth County has increased by almost 70 percent, from $115,000 in 1997 to $193,000 today, Zaukas said. Included in that median figure are the $3 million lakefront homes in the Geneva Lake and Delavan Lake areas, Zaukas said.
Egan and Zaukas agreed that increased demand and a lack of supply are fueling the sustained rise in Walworth County housing prices.
"Walworth County is a good place to live because of accessibility to markets," Egan said.
It is a crossroads among Chicago, Milwaukee, Madison, Janesville and Beloit, he said.
Zaukas said the county is a tourist site that the wealthy find alluring.
"It's a location for people with a lot of disposable income," Zaukas said.
Walworth County also has a stable workforce. Many businesses have employees who have worked at the same place for 15, 20 and 30 years, Egan said. Those people are not moving out soon, he said.
Finally, brokers still are able to "flip" houses in the Walworth County market, buying homes needing repairs at low cost, repairing them and then selling them for a profit.
Zaukas said Community Action regards homes of $139,000 or less as affordable for low- to middle-income homebuyers. Of more than 300 listings in Lake Geneva, only four are for $139,000 or less, she said. One of those is a mobile home on a rented lot. The others all need substantial repairs.
Finally, the lakes contribute their share to the general property values. Homes as far away as a mile from Geneva and Delavan lakes still are considered to have ready lake access, which adds to their value, Zaukas said.
