Nobody really knows the exact statistics of how many college graduates or other young adults live with their parents (and probably not because they like it). It is common knowledge homeownership, even renting, are unaffordable to many, so home construction is at historic lows. But that balance is about to change.
“The scale has tipped for many apartment dwellers in favor of purchasing a home,” says Deborah Meyer, senior vice president and chief marketing officer fro PulteGroup Inc., due to a steady absorption of multiple years of significant increases in rental rates.
As a rule, borrowers shop for lenders who at least in theory have the power to lower mortgage lending costs, probably with the exception of construction loans that bring homebuilders into home financing.
Centex, a national homebuilder based in Bloomfield Hills, Mich., and a subsidiary of PulteGroup Inc., one of the country’s largest homebuilders, is walking one step further into that gray zone.
A new series of Centex homes is designed “to respond to the increasing demand for affordable homes by “Generation Y,” the largest U.S. demographic, according to executives.
Centex has somehow rearranged the home shopping process starting with a targeted design. The Centex Independence Series homes are designed and priced “to allow potential buyers the opportunity to pursue homeownership at a price comparable to renting” in the area.
The program was initially rolled out in the Greater Chicago area, St. Louis and San Antonio. Now Centex is ready to introduce it to other U.S. markets over the next 12 months.
Meyer argues that based on today’s lower home prices, coupled with record low interest rates on all 30-year fixed-rate mortgage loans, homeownership is more attainable than ever, so demand for the Independence Home series is strong. “Not only are renters extremely motivated” to get a good deal now, but they also see the benefit of long-term investing.
The new homes are locally priced. For example, in San Antonio prices start at $105,000, which on average translates into monthly payments of roughly $775. In the Chicago area prices start at $129,000 at about $999 monthly.
These estimated monthly payments are made based on 30-year, fixed interest rate FHA mortgage loan requirements on principal, interest rate, taxes, insurance and mortgage insurance and do not include community association fees or other requirements specific to a property.
Currently, FHA requires a downpayment of at least 3.5% and an upfront mortgage insurance of 1.75%. Interest rates on FHA mortgages are at 3.75% and annual percentage rates between 4.83% and 4.87% or more depending on the area.
In addition, Centex’s affiliate Pulte Mortgage is further assisting renters who aspire to become homeowners through its Mortgage Financing Advisor. The program offers prospective homebuyers access to a trained financial advisor who can educate them about the mortgage lending process and their financing options.
Besides price and counseling, another advantage is design flexibility. The program is giving customers “the flexibility to make trade offs” between their architectural and financial affordability choices.
Centex allows buyers to select specific architectural features from five basic floor plans. These options include one- and two-story properties ranging from 1,100 to 2,300 square feet with two to four bathrooms, and additional features such as lofts and basements.
Until now, according to Meyer, the Centex brand was reaching “only a small percentage of renters who could potentially buy a home today.” The Independence Series homes are expected to generate new first-time homebuyer demand in the 20 states where Centex operates. The goal is “to more effectively serve” this buyer group, he said.
