State to give more money to first-time homeowners

A state agency is putting $50 million more into a program it says will help low- and middle-class families buy their first homes, but some say such programs eventually hurt the housing market.

The Nevada Rural Housing Authority has announced the money will go into a program called "Home at Last" that has been running for the past year and a half and already given away $33 million. The program provides low-interest mortgage loans as well as money for down payments.

The rate, 6.45 percent for 30 years, is slightly below the average of loan rate of about 6.75 percent, and the down payment assistance is a "huge draw" said one lender.

Buyers in the program get a grant for 4 percent of the cost of the loan. For instance, someone who gets a loan for $250,000 gets $10,000 to go toward a down payment.

"The biggest portion (of money) first-time home buyers do not have is the down payment," said Kay Miller, a senior loan officer with lender Chase Home Finance.

The lower interest rate is helpful, too, because buying a house is a good investment in itself, said real estate agent Sharon Green, co-owner of ERA Pioneer Properties in Carson City.

"For someone who was going to be throwing away rent money," she said, "why not buy the house? ... At least the money is going to their home instead of their landlord's home."

Since it started, the program has worked with 150 first-time homeowners and military veterans. The average household income of the recipients is $55,000. The average price of the home they buy with the loans and grants is $210,000.

In Carson City, the maximum amount a two-person family can make to be qualified program is $72,000 and, for three or more people, $84,000. The maximum amount the house bought can cost is $358,875.

D. Gary Longaker, executive director of the rural housing authority, said he helped start the program because the state had a "tremendous need" for it. Many first-time homeowners seem to be a credit risk, he said, which makes it difficult for them to get a good loan.

Getting these owners, often young families, to buy a home helps communities retain professionals and spark the economy.

But Dr. Erick Eschker director of a real estate research at Humboldt State University in Arcata, Calif., said subsidizing buyers can be dangerous because "it is not clear that these programs are all that effective."

He said the advantage of having new home owners in an area is often canceled by the rise in already high home prices. The market needs to be able to adjust so prices can fall, he said.

With prices already high, subsidizing buyers could help push an economy into a situation where "you'll have a generation of people who will not be able to buy a house or it will be delayed for 20 years."

He added that this kind of policy also has political and ethical implications.

"A bail-out could really take from one group and give to another, and there's equity issues there and justice issues ... There are some benefits of home ownership. Home owners keep their lawns nice and this and that, but there are some bad things home owners do, too."

• Contact reporter Dave Frank at dfrank@nevadaappeal.com or 881-1212.