Home-buyer assistance programs feel pinch of slowdown

NORFOLK

Inside a bland conference room, Sherri Skinner listened intently to a local Realtor explain the home-buying process.

This spring, with the assistance of the Norfolk Redevelopment and Housing Authority's HomeNet program, the single mother and account representative at a local hospital will buy a townhome on Church Street. She has been working toward that goal for more than two years, saving money and cleaning up her credit rating.

But Skinner is part of a dwindling group of people seeking to buy a home. Where she might have been one of 40 participants in a home-buyer education class two years ago, last week she was one of 10.

Authority officials said that as the economy has weakened, participation in its first-time home-buyer program has dropped more than 70 percent in the past 18 months - despite offers of down-payment assistance and ultra-low interest rates for low-income buyers.

The slowdown could have far-reaching consequences.

For years, housing authority officials have relied on HomeNet to provide a steady stream of home buyers for its redevelopment projects. However with fewer people in the pipeline, there is concern that the authorities' construction projects - often in communities they want to renovate and improve - could slow or stop.

"It can put development projects at risk," said LaShawn Fortes, HomeNet's director. "To have stable neighborhoods, you have to have stable buyers. We've had several who've actually said, 'Maybe I need to wait' or 'I'm not sure I'm going to have a job tomorrow.' "

Although Portsmouth hasn't seen a drop-off, Virginia Beach's home-ownership program has had declines similar to Norfolk's, despite increasing its down-payment assistance from $7,000 to $20,000, said Sharon Prescott, the city's housing development administrator. In the past year and a half, only four home buyers have used the city's assistance program - down from as many as 20 in previous years, she said.

The problem, administrators said, is multipronged. Some people are waiting for housing prices to bottom out. Others worry about job stability and foreclosure.

"People are just not buying homes," said John Allen, vice president of housing and financial services for Norfolk's Up Center, which provides home-buyer classes. "It's all because of the economy."

Still others, Prescott said, racked up so much debt during the boom years that they now don't qualify for loans under stricter lending standards.

"There's a lot of interest, but people have such serious credit card debt. They can't qualify," she said. "It's very frustrating. If people would pay down some of that debt we'd have some winners here."

The home-assistance programs are aimed at residents with incomes below 80 percent of an area's regional household median. For families of four, that's $52,100. In exchange for meeting with counselors, attending home-buyer education sessions and providing 1 percent of the home's purchase price, qualifying home buyers can receive thousands of federal dollars on their down payments. Others can get lower interest rates - now dipping around 3.8 percent.

"You're talking about $20,000 to $30,000 of free money," Fortes said.

Yet for the first time, she said, she might have to market her program to draw attention to it. HomeNet employees have to meet a goal of closing on 60 houses from July of 2008 to June of 2009 - a target that is down from 108 closings from June 2006 to the middle of 2007. They are about halfway to their goal right now.

Fortes said they plan to contact teachers, police officers and other city employees who may qualify.

Skinner said she heard about the help from a co-worker.

One evening last week, she sat in a class that included two couples required to be there to meet the standards of their VHDA loan, a few other HomeNet clients and 27-year-old Tony Morgan, a security guard who was referred by a lender. Morgan said he planned to sign on as a HomeNet client.

Participants were asked to turn in spending plans that broke down their monthly expenses and projected how home insurance, maintenance and taxes would affect their budgets. They heard from real estate agents, home inspectors and an attorney about everything from getting title insurance to signing a contract.

"Things are changing. They really are," Anita Roberts, a HomeNet home-ownership counselor, told them.

"You guys are doing the best thing by being educated and doing your homework."

In Norfolk, the housing authority boasts that not a single HomeNet participant has gone into foreclosure.

Education programs run by The Up Center and Portsmouth and Virginia Beach have similar success rates, officials said.

Skinner has already pre-qualified for a mortgage and said she hopes to be in a brick, three-story townhome in the Maplewoods at Olde Huntersville - a new mixed-income development led by the Norfolk housing authority - by the spring.

"It's just having something of my own," she said.

Meghan Hoyer, (757) 446-2293, meghan.hoyer@pilotonline.com