Don't You (Forget About Habitat)

Remember Habitat’s first-time homebuyers when considering local housing reports

By Dwayne Spencer, Memphis Habitat President & CEO

In seeing the Aug. 18 The Commercial Appeal story on the latest local housing market data from the Memphis Area Association of REALTORS?, I was struck by the need to add a Habitat for Humanity perspective.

This report, while relevant, timely, and certainly something to follow, focuses on the traditional housing market. That conventional market is still out of reach for far too many of our local neighbors – people who very much want to buy homes but are unable to access loans, despite their stable income.

With that in mind, here are five things Habitat for Humanity of Greater Memphis wants you to know:

1. Habitat’s affordable sales prices with no interest make the difference.

The July 2023 median home sales price was $239,950; the average listed sales price was $362,771. Memphis Habitat homes sell at prices ranging from about $125,000 to $159,000. Through a traditional lens, that lower sales price might not be seen as positive for the market, but for the families Habitat serves, our mortgages at an affordable sales price with no added interest make the difference between being able to buy or continuing to rent. A buyer with a conventional 7%, 30-year mortgage on a $135,000 home will pay $188,473 more over the life of the loan, for a total of $323,473!? By comparison, a Habitat buyer with a $135,000 mortgage pays just that – $135,000 – over 30 years.

2. In South Memphis, Habitat’s bringing higher values.

Memphis Habitat’s 40th Anniversary Build is underway in the Castalia Heights area of South Memphis right now. According to the recent MAAR data, South Memphis’ median home sales price ($59,750) and average sales price ($73,571) increased from July 2022 to 2023, but those prices are still lower than the appraisals Habitat expects for the 12 homes it’s currently building there. A recent pre-construction appraisal for a 3-bedroom Memphis Habitat home for the area came in at $145,000. That exact same house plan was built in the community in 2019, and it appraised and sold for $85,000.

3. Habitat’s homes sell at appraised value, with no profit.

Memphis Habitat sometimes refers to our mortgages as no-interest, no-profit. Our goal is to keep our homebuyers’ housing costs at around 30% of their gross income. We can do that because we don’t add interest to the 30-year mortgages. We also sell the homes at appraised value, regardless of what it costs Habitat to build. Just like all builders, Habitat’s costs to build have increased and are now around $175,000 per home. We don’t pass that expense on to our buyers because donations of funds from donors and gifts of time from volunteers help support the house-building program. The Memphis ReStore also helps offset the costs of Habitat’s local work by generating daily cash flow to support operations and programs.

4. Habitat offers a loan product that serves low- and moderate-income buyers.

Since Day 1, Memphis Habitat has existed to be a resource for aspiring buyers whose incomes fall outside of what qualifies in the conventional mortgage world. We work with buyers earning at 80% or below area median income and sometimes work with buyers earning below 50% AMI. Habitat buyers must have stable, verifiable income to support their monthly mortgage payment, and just like any other lender, we look at income ranges based on family sizes, debt-to-income ratio, and credit to determine their mortgage-readiness. Our program is simply built to serve those who could not access traditional mortgages, especially with interest.

5. Habitat mortgages can be less than rent and build equity.

With rent and interest rates still on the rise, housing costs remain high across our community. Only 29% of homeownership eligible units and 18% of renter eligible units in Memphis are affordable to people who make half of the area median income (about $44,000/year). A 2-bedroom apartment costs at least $1,032 a month on average. Habitat’s buyers often find our mortgages – which range from about $650-$850 per month with mortgage, insurance, AND property taxes – more affordable than renting. Plus, when they buy, they are acquiring an asset and building equity.

We cannot forget our local affordable housing crisis continues, and we must remember the buyers and aspiring buyers who may fall outside the traditional mortgage market. A variety of mortgage products – traditional, low-interest, and others like Memphis Habitat’s loans with no added interest – are needed to open opportunities for buyers and free strain on the rental market.

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About Habitat for Humanity of Greater Memphis

Memphis Habitat partners with people in our community to help them build or improve places they can call home through new home construction, rehabilitation projects and Aging In Place accessibility and mobility modifications for homeowners age 60 and older. Since 1983, Memphis Habitat has helped nearly 600 homebuyers secure affordable mortgages and completed rehabilitation and home modification projects in partnership with more than 1,100 local homeowners, helping them achieve the independence they need to build a better life for themselves and their families. For more information, visit www.memphishabitat.com.

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