This content was originally published by the Longmont Observer and is licensed under a Creative Commons license.
Welcome to the fifth annual Longmont Housing Affordability Review. The goal of this report is to compare the affordability of homes in Longmont to the affordability of other nearby towns.
This introductory note lays the foundation for our data, its analysis and conclusions. The data from this report comes from IRES [1] the predominant Multiple Listing Service (MLS) system that REALTORS® and real estate agents alike use to market homes for sale. Due to incompatible data sets, data from REColorado [2], the primary MLS for the Denver Metro Area has not been included.
Also, this report does not account for any private transfers or For Sale by Owner (FSBO) transactions. Due to the high usage of IRES in the areas covered by this report, the conclusions and data presented here can be considered reliable even though the data set is incomplete.
The current formula for measuring affordability was established in the 2017 report. This new formula or scale was chosen due to its flexibility to adjust over time based on the economy, housing prices, income levels, the unemployment rate, and other economic indicators. It relies on maximum income data published by the City of Longmont, which is then handed to
a local mortgage expert, who calculates buying power and the home price a borrower can afford using current standards and interest rates appropriate for the time period.
The City of Longmont, The U.S. Department of Housing and Urban Development (HUD) [3] and other governmental agencies use Area Median Income or AMI [4] for many lending borrowing and financial aid decisions. The current Boulder County AMI is $75,669. This is the income limit that Colorado Housing and Finance Authority (CHFA) [5] looks at to qualify
people for down payment assistance programs, which constitute a portion of the purchasing power utilized in this report.
HUD and CHFA use the Boulder County AMI for their programs, but a reasonable argument can be made that county-wide number is higher than that of Longmont alone. With this in mind, we use Longmont’s 2018 Maximum Income Limits for Housing Programs [6], which are much more conservative than the Boulder County AMI.
According to the City of Longmont the income limit for down payment assistance for a single person household is $50,350, up from $47,600 in 2017. The income limits for a family of four for 2018 is $71,900, up from $68,000 in 2017. Using these maximum income levels, a borrower could qualify for a CHFA 5% down payment assistance program to help them get into a home.
Using the current maximum income for a single person of $50,350, the CHFA down payment assistance of 5%, an interest rate of 5.25%, and a $200 per month HOA payment, a borrower could qualify to purchase a home up to $275,000. This is the maximum purchasing power for this person, any debt they have (credit cards, car payments, etc.) will reduce their purchasing power and they will have to find an even less expensive home to buy. It’s reasonable to expect that this single person would strongly consider an attached home, such as a condo or townhome.
For a family of four, using the maximum income limit of $71,900, the same 5% CHFA down payment and a 5.25% interest rate (no HOA fee), this family would qualify for a loan up to $360,000. This larger family would need more space, so it is reasonable to expect the family would strongly consider a single-family home. This scenario also assumes $300 per month in debt payments. As outlined in the single person scenario above, any increase in monthly debt would reduce the price of the home they could afford to purchase.
The two most common hurdles to purchasing a home, especially in the 80% AMI income levels are high debt and a low credit score. The most common sources of high debt are car loans, credit card balances and student loan payments. While housing prices are increasing, the ability to purchase a home isn’t based just on price. If we were to magically increase our inventory of affordable homes, many potential borrowers would still not qualify due to the self- inflicted burden of high debt and bad credit. The role of personal financial responsibility in the pursuit of home ownership cannot be over stated.
Housing prices are increasing at all levels in and around Longmont. Despite the increasing price of real estate in every area covered by this report, once again it’s evident that the availability of affordable housing in Longmont surpasses that of nearly all our neighboring towns.
Please use the contact information below if you have any questions.
Respectfully,
Kyle Snyder
Account Executive, First American Title
720-534-8355
[email protected]
Amy Aschenbrenner
CEO, Longmont Association of REALTORS®
303-772-5555
[email protected]
