ADDISON COUNTY — On July 20, Bonnie and Stanley Godfrey closed on a Middlebury home with the help of the Addison County Community Trust (ACCT). With their grown children already out of the nest, the couple had been looking for a modest two-bedroom house that could be made handicap-accessible as they aged.
“We found a lot of houses way above what we could afford,” Bonnie Godfrey said.
And the ones that were within their price range would have needed renovations so costly that the low price tag was not worth it.
After years of living in Middlebury’s Lindale Mobile Home Park, Godfrey said that when ACCT offered them the chance to buy a new, affordable house with the help of a $40,000 grant, they jumped at the opportunity.
The Godfreys were lucky, but many in the county are struggling with steep area housing prices. According to a report released this summer by the Vermont Housing Finance Agency (VHFA), while the price of a home has risen 1.7 percent nationally from 2004 to 2009, housing prices in Vermont have jumped 13 percent over the same period.
And according to housingdata.org, a website maintained by the VHFA and the Center for Rural Studies, within Addison County the median primary home price has increased 26 percent, from $168,000 to $211,000 from 2004 to 2009. That number is also higher than the $190,000 median home price in Vermont as a whole.
Maura Collins, the policy and planning manager at VHFA, said that one of the many factors keeping Vermont housing prices on the rise is the large number of comparatively expensive vacation homes in the state.
“Vermont is ranked second (nationally) after Maine for the most vacation homes,” she said. “That has a lot of impact on housing prices.”
Still, with the help of the ACCT, the Godfreys were able to move from Lindale Mobile Home Park into a house on their own property in Middlebury South Village. Bonnie Godfrey estimated that the house’s ultimate cost was about $179,000, and, after the grant from ACCT, that number fell to around $139,000. Although they have a mortgage, the price is within the Godfreys’ grasp.
ACT Executive Director Terry McKnight said the Godfreys got the last Vermont Housing and Conservation Board grant specifically earmarked for homes in the Middlebury South Village neighborhood. But he said the VHCB has some other grant money in a separate pool that local homebuyers may be eligible for.
He said ACCT would try to match needy people with appropriate subsidies. For VHCB grants that means anyone with an income under the median income, which in Addison County is $66,000 for a family of four.
“People who are interested should contact the Trust and fill out an application,” McKnight said. “This is really targeted at the middle class.”
STRUGGLING TO BUY
This and other affordable housing opportunities that ACCT creates come as a welcome relief to prospective homebuyers who find themselves in the recent recession and struggling to afford the state’s rising home prices.
And according to VHFA’s report, “Between a Rock and a Hard Place,” as home prices continue to rise, housing becomes more and more difficult for the average Vermonter to afford. VHFA reported that 80 percent of professions in the state do not have an average income high enough to afford the down payment and mortgage on a median-priced home.
And while renting tends to be less costly in the short term, the average two-bedroom apartment in the state rents for $920, and 46 percent of professions have median wages below what’s necessary to afford so much rent.
These thresholds are calculated according to a longtime federal standard stating that a household should spend no more than 30 percent of its income on housing — anything above that leaves too little extra money for transportation, food and other necessary expenses.
And with rising costs for health care and transportation, said Collins, some academics say the percentage that a household spends on shelter should be much lower. The VHFA’s report stated that in Vermont, 48 percent of renters and 39 percent of owners paying off mortgages are “cost-burdened” — that is, they are paying more than the 30 percent guideline in order to cover housing (which includes insurance, property taxes and utilities for homeowners, or rent and utilities for renters).
These numbers mean that Vermont has the seventh-highest percentage of cost-burdened renters in the nation, and the 15th-highest percentage of cost-burdened homeowners.
In Addison County, according to Collins, about one-third, or 4,780, of the households are cost-burdened.
ACCT builds and maintains affordable rental properties and provides grants and financial help to those, like the Godfreys, who are trying to pay for a home. McKnight said his organization saw the number of people interested in buying a home fall in 2008 and 2009, although so far this year there has been a slight jump in demand. He added that community land trust organizations around the state had been seeing a similar downward trend in housing demand.
“The demand for rentals is very high,” he said. “People are discouraged, and they are thinking that prices will continue to come down.”
But Collins said people may be waiting in vain.
“Prices don’t necessarily go by what people can afford. They are influenced by other market factors,” she said.
She added that even the small decline in housing prices that Vermont has seen is mainly attributed to insecurity, and that there is no indication that housing prices will decline in the future due to a demand for cheaper housing.
“We haven’t seen it yet,” she said. “People are just waiting to see how it will sugar out.”
THE COST OF FINANCING
Kim Bina is the interim home ownership director at NeighborWorks of Western Vermont, which helps Vermonters with education, counseling and access to affordable loans. Bina said that is one respect it is easier to buy a home today than it was in the past — there was a time when just the down payment for a median-priced home would have been prohibitive.
“My parents had to have 20 percent down to buy a house,” she said. “And how many young couples have saved $43,000?”
These days, said Bina, a 3- to 5-percent down payment is standard — between $6,300 and $10,500 on a median-priced home in Addison County, plus closing costs of between 4 and 5 percent. This makes the initial investment more manageable, although homebuyers who opt for a smaller down payment also have to pay extra insurance charges.
But a smaller down payment is only part of the picture. A small down payment means putting off more than 95 percent of the cost of the house for later, something that Bina has seen people struggling with in recent years. When the economy flagged, people found themselves less able to make their regular payments.
Many area families are struggling with their mortgages, and because of this NeighborWorks recently added a foreclosure prevention program, which offers anyone in the organization’s coverage area — Addison, Bennington and Rutland counties — a series of classes and counseling. The program covers estimating budgets and the financial viability of a mortgage, learning about the foreclosure process and how to prevent it, and how to make the decision to put a house on the market.
“Often people do come away with a loan modification that is temporary,” said Bina. “It lowers their payment until they can get caught up.”
Bina said that the current economy is making people more judicious homebuyers — one of the reasons that the housing market is slow right now.
“I think more people are trying to save in this economy,” she said. “People are getting smarter about saving their incomes.”
And for better or worse, she said that the financial crisis and recent federal financial reforms have added extra hurdles to the mortgage process.
“It is more difficult for people to get loans, and higher credit scores are required,” she said. “Now it takes longer to get a loan.”
“It’s never been harder (to buy a house) than right now because of the economy, and the impact that the financial crisis has had on lending,” said McKnight.
While the homebuyer market is easier to analyze, it is almost impossible to collect data on renters who fall behind on their rent and lose their leases. There are fewer places to turn for financial help for renters, as opposed to buyers.
Often, said Collins, renters who are struggling have nowhere to turn but to area homeless shelters.
Elizabeth Ready, executive director of the John Graham Emergency Shelter in Vergennes, said inability to keep up with rent is just one of many factors that lead people to seek help from her organization. Others include disability, substance abuse and job loss. But all reasons included, she said she has never seen the shelter as busy as it has been in the past couple of years.
Not too many years ago, she said, the shelter was nearly empty during the summers, since many of those who seek help are able to camp outside in the summer.
“One year, we even closed for a couple weeks in July to do renovations,” Ready said.
Now, even with the addition of two buildings with four units each, though, demand has risen dramatically for the shelter’s services.
According to the U.S. Department of Housing and Urban Development, there has been a 30 percent national increase in family homelessness since the recession began in late 2008.
“That definitely rings true for us,” said Ready. “There’s been a huge increase in demand. Anecdotally, we are seeing people’s stays going a lot longer.”
The people seeking help have also changed.
“There are more families with children,” she said.
SHELTER FROM THE STORM
But by many estimates, Vermont is weathering the storm better than other states. At the end of 2009, the VHFA report stated, the state had a foreclosure rate of 2.5 percent on all loans — which is well below the national average of 4.6 percent, and consistently places Vermont as the state with the smallest ratio of foreclosures to homes.
The report by VHFA attributes this relative stability to policies and safeguards that the state put in place before the financial crisis; the limits on land development, which are stricter in Vermont than elsewhere; the state’s older population and fiscal conservatism; and a reliance on community banks.
Sarah Cowan, senior vice president and loan department manager at the National Bank of Middlebury, said the bank has certainly seen a rise in delinquencies over the past years, but that she has not seen nearly so bad a spell here as with many banks in the rest of the nation.
“Our delinquencies are 50 percent lower than peer banks in other parts of the country,” Cowan said.
She said that the small size of the bank makes it easier to help individual customers find alternatives to loan delinquencies.
“In general in Vermont, banks are working very hard with their borrowers so that we can make sure people don’t lose their homes,” she said.
As for the number of people taking out new loans with the National Bank of Middlebury, she said the numbers now don’t compare to those of a couple years ago, but that there are signs of life in the housing market.
“We are doing more construction loans on homes than we were a year ago,” she said. “And the number of purchase loans has been steady. We are actually feeling good about where we stand.”
Reporter Andrea Suozzo is at [email protected]