What's Affordable?

Like many young couples, Jonathan and Amber Matyi dreamed of buying a home of their own. But their dream wasn't likely to come true in pricey Philadelphia, where the Matyis began their married lives.

Jonathan, 26, wanted to leave the finance industry and take a more emotionally fulfilling—but lower paying—job working with young people. And Amber, 25, wanted to give up her job as a kindergarten teacher, start a family and become a stay-at-home mom. So the Matyis moved to Northeast Florida, where home prices are considerably lower than in most Northeastern metro areas, hoping to enjoy a comfortable lifestyle on a modest income.

So how's it working out? So far, so good.

Jonathan and Amber both got jobs as mentors to middle-school and high-school students through Project SOS (Save Our Students). They're expecting a baby girl in October. And they bought a brand new KB Home near World Golf Village in St. Johns County.

"It's a beautiful home and we could afford it," says Amber.

The Matyis were lucky to find their 1,107-square-foot, three-bedroom home in Samara Lakes' Briar Wood community. Prices start in the $130s, which is extraordinarily affordable even by Jacksonville's less budget-busting standards. Indeed, as land prices, construction costs and demand for housing have soared, new single-family homes priced under $200,000 have become exceedingly rare.

But, as the Matyis discovered, such bargains are still available if you know where to look.

As a general rule, homes located farther away from the region's urban core are more affordable. So you might find yourself home-shopping in areas that were once considered to be out of the mainstream. And don't expect anything but the most basic finishes—laminate countertops and floors covered with carpet or vinyl, for instance. So, while a kitchen fit for a gourmet chef may be high on your list of wants, focus more on practical considerations. Your home can always be upgraded later.

As for the location, there is very little uncharted territory left in Northeast Florida. The region's expanding highway system means you can probably get where you need to be fairly quickly—regardless of where you live.

Those are lessons the Matyis learned only after a frustrating week during which they found nothing suitable for their needs. The homes they could afford were in less-than-desirable neighborhoods. The neighborhoods they liked had no homes they could afford.

Then they visited KB Home's Samara Lakes community. "We just fell in love with it," Amber says.

The homes in Samara Lakes were certainly priced right. But they also boasted some upscale touches, such as stacked stone on the exteriors. Plus, shared amenities, including a pool, a playground, basketball courts and a clubhouse were planned.

Better yet, Samara Lakes was near the couple's work and church, where Jonathan serves as a youth minister.

And St. Johns County's public schools are among the best in the state—a big selling point for young couples with growing families. "This home is going to be the center of our lives," says Jonathan.

Although the Matyis story had a happy ending, other buyers may not be as fortunate.

According to the National Association of Homebuilders Housing Opportunity Index, the median price of all homes sold in the Jacksonville MSA (Clay, Duval and St. Johns counties) was $165,000 during the first quarter of 2005. That's up from about $132,000 during the same time frame last year.

Concurrently, the median household income in the Jacksonville area was $57,700. Thus, according to the HOI's calculations, families earning the region's median household income could afford to purchase 67.3 percent of the homes actually being sold.

Although an HOI rating of 67.3 allows Jacksonville to retain its distinction as the state's most affordable major market, it's still less affordable than it was as recently as 2003, when the region notched a 77.8 (Tampa's HOI is 61.8, Orlando's is 54.8 and Miami's is 26.3).

Even many production builders, who made their mark building so-called "starter homes," are now exploring higher price ranges as land and material costs escalate. Still, some builders are committed to the challenge of providing homes that families with average incomes can afford.

KB Home, for example, builds homes in all price ranges, but works hard to provide opportunities for entry-level buyers as well.

"It's our corporate philosophy, that we try to serve as many buyer profiles as we can," says Todd Holder, vice president of operations for KB Home in Jacksonville. "We try to make sure that people who work and play in a community can live there as well."

In addition to Briar Wood in Samara Lakes, KB Home is building single-family homes for less than $200,000 in five other Jacksonville-area neighborhoods: Cartesian Point (from the $160s), Timber Creek (from the $180s), Dunns Creek Plantation (from the $180s), Hawks Pointe (from the $170s) and Adams Lake (from the $170s).

Richmond American Homes is also building homes for less than $200,000 in five local neighborhoods: Conifer Ridge (from the $170s), Rolling River Estates (from the $180s), Morse Oaks (from the mid-$100s), Heron Isles (from the high $160s) and Silver Creek (from the high $180s).

"We realize there's still a strong demand for starter homes in this market," says Amber King, the company's market director. "So we're dedicated to providing classic floorplans, quality construction, creative designs and superb craftsmanship for our first-time buyers."

Other builders are also still selling homes priced under $200,000. But remember—many builders are raising prices on a monthly basis, meaning changes are likely by the time this issue of Jacksonville Homebuyer is published.

At press time, locally owned SEDA Construction Company was building starter homes on Jacksonville's Westside in Gentle Woods, where one- and two-story homes start in the $160s and top out in the low $200s.

SEDA is also building homes priced from the $170s to the mid-$200s in the Westside's Hammock Plantation, which has a playground and many cul-de-sac streets.

"We've been selling these homes at an immense rate," says Bob Maunde, SEDA's manager of sales and marketing." How long are we going to have homes under $200,000? I don't know. Even on the Westside, prices are going up."

Another Westside player is Harmony Homes of North Florida/A Drees Compay, which is building homes priced from the low $140s to the $170s in Morse Glen. Harmony has several other affordable communities slated to open soon, including Campus Hills and Sheffield Oaks on the Northside.

"We try to find niche pieces of land that are not wildly expensive," says Linda Moore, Harmony's vice president of sales and marketing.

Engle Homes has communities throughout the region in which homes were priced under $200,000 at press time. Among them: Creekside Bend, Lauren Oaks, Lakeview at Watermill, Lofton Pointe, Lois Estates, Rolling River Estates, Silver Creek, Waterbrook Falls and White Oak Trail.

In addition, Mattamy Homes is building homes under $200,000 in Hickory Village and in Cannon Point at OakLeaf Plantation.

There are three floor plans starting at under $200,000 in Hickory Village, located in Nassau County just a few miles from the bridge to Amelia Island. The homes range from just over 1,500 square feet for a three-bedroom, two-bath model to just under 1,700-square feet for a four-bedroom, two-bath model.

In amenity-rich OakLeaf Plantation, the 1,324-square-foot Brianna model is offered for under $200,000.

"We're really committed to building for first-time buyers," says Tami MacKinnon, Mattamy's vice president of sales and marketing. "We have 14 new plans designed specifically so that we can sell them at a reasonable price to first-time home buyers. Instead of building bigger homes on bigger lots, we're trying to put out really good homes for starter buyers."

WHAT CAN YOU AFFORD?

Thinking about buying your first home? Wondering how much home you can afford? Figuring it out isn't rocket science—it's basically a matter of comparing what you earn with what you owe.

Begin with your gross monthly income, which includes salary plus additional recurring income you can document on a tax return, as well as unearned sources of income, such as alimony or investment income.

Then tally your monthly debt load, which includes all ongoing obligations, such as credit cards, installment loans, personal debts and other outlays. If it's revolving debt, such as a credit card, use the minimum monthly payment. If it's installment debt, such as a car payment, use the current monthly payment. And remember—you don't have to count any debt that's scheduled to be paid off in six months or less.

Typically, lenders prefer that your monthly housing expense, including taxes and insurance, not exceed about 28 percent of your gross monthly income. Further, your proposed monthly housing expense plus your total monthly debt service shouldn't exceed about 36 percent of your gross monthly income. If it does, your application may exceed the lender's underwriting guidelines and your loan may not be approved.

However, if you're able to buy the home while borrowing less than 80 percent of the home's value by making a large cash down payment, the qualifying ratios become less important. Many first-time buyers use gifts from friends or relatives to fatten their down payments. Under current tax law, any individual can "gift" up to $11,000 to another individual without any tax consequences to either party.

You might also choose to apply for an adjustable-rate mortgage with a lower initial payment than a fixed-rate program. Other programs include interest-only loans, which offer the advantage of lower initial rates and usually convert to standard loans at prevailing interest rates within 10 years.

But interest-only loans carry risk—particularly if the economy turns sour and home values decrease. That means a borrower could end up owing more on a home than it's worth. Unless you're not planning to remain in your home for very long, a traditional fixed-rate is usually more appropriate.