Millennials find useful tool in hunt for the perfect house
Walking into Alex Eames and Mary Heneberry's recently purchased house in Salem, two things are immediately apparent: The home has been heavily renovated since its 1960 construction, and these changes are too unique to be found elsewhere on the market.
Most striking is the kitchen floor, made of brick.
Other renovations included putting in a KraftMaid kitchen with stainless steel appliances, knocking down a few walls to make the kitchen-dining-living area more open, and changing the layout of both bathrooms.
Previously, the house didn't have a floor, toilet or sink, Eames said.
The couple, ages 30 and 29, moved into the home Oct. 1. During the three months it took for the home to be move-in ready, they lived in an apartment next to the Coast Guard Academy, where Eames works in admissions and Heneberry coaches women's lacrosse.
They went through the Federal Housing Administration's Section 203(k) program, which enables homebuyers to finance the purchase and rehabilitation of a house through a single mortgage.
"Everyone at this point kind of wants everything. No one really wants a starter home anymore," said Samantha Egger of Coldwell Banker. "They want their forever home, so the 203(k) loan is great, because you can take more of a beat-up, three-bedroom, one-and-a-half bath and make it what they want."
The program is not new, but some in the real estate industry are realizing the potential of marketing renovation loans toward millennials, which the Pew Research Center defines as those ages 20-36. For Eames and Heneberry, it was a good alternative to what they were seeing on the market.
"We're looking at a lot of houses and we're going into these places where they're pretty much at the top of our budget," Eames said, "and it doesn't really let us do any renovations or changes, and we don't really like what we're looking at."
Heneberry said she probably visited 30 houses and, with each one, she had an issue with "the flow of the house."
Egger convinced them to consider the FHA process. They settled on Prime Lending as their lender and Carlo Polimeni as their general contractor.
In September, Prime Lending home loan professionals David Johnston and Kelly McGuinness gave a presentation to the Eastern Connecticut Association of Realtors on "the power of HGTV and how to translate that to real-life situations for the millennials," Johnston said.
It's a presentation they've been doing in real estate offices throughout Connecticut for about a year. While millennials as a group have been slow to purchase homes, McGuinness saw a study that predicted the largest influx of millennial real estate buyers to come in 2019 — and she wants to be prepared.
What's different about this generation, McGuinness said, is that they're growing up "intensely interested" in HGTV, the cable channel that features how-to shows, many of them related to real estate.
And in New England, with the oldest homes in the country and wear-and-tear from extreme weather conditions, plenty of homes are ripe for repair.
"Millennial buyers typically want newer homes with open floor plans, easy to maintain, tech features, green features, new kitchens, new baths," McGuinness said. She added of HGTV, "It's a lot of sexy programming with not a lot of how-to, so we made a commitment this year to solve the how-to."
For Eames and Heneberry, the how-to meant putting 3.5 percent down on a $280,000 loan, about the maximum FHA loan allowed for New London County. That loan was for the $160,000 home price, plus renovations.
"This is definitely not a project for someone who wants a turnkey property," Eames said, using a term that refers to move-in-ready places. "It's definitely not a project for someone who's not willing to put in a little bit of work."
He noted it's also not a project for a house-flipper, considering FHA requires borrowers to live in their home for a minimum of a year.
Clinton Babcock, 23, said he and his wife are planning on living in their FHA-renovated home in Ledyard for about two years and then selling. Their renovations included new siding, windows and doors.
"I wasn't looking for something with too much work, and not a huge house," he said. They paid $110,000 for the house in Ledyard, to be near family and work, and then got a $35,000 renovation loan.
Babcock noted that he and his wife do watch HGTV, specifically "Fixer Upper" stars Chip and Joanna Gaines.
No time to renovate on their own
Thompson Realtor Ryan Lajoie said he hasn't had a ton of renovation loans but considers the process "a tool in our toolbox," something to recommend "if it happens to be the right house with the right fit that's at the right time."
He noted that some buyers who didn't necessarily want to go the renovation route are now considering it, because houses were flying off the market this year and, for some buyers, the only places left in their price range were fixer-uppers.
Similarly, Westerly-based Realtor Wendy Brown commented, "I think if they've exhausted the possibility of what's out there, and they realize that they're not going to get what they want, then they start being open to the renovation loans."
That realization and openness, Brown said, can sometimes take several months of searching.
She has found that millennials largely "are looking for shiny and new" and "they want little or no work." But this can be a tall order, considering the less expensive entry-level homes that don't need work are the ones that go the fastest.
While Brown said renovation loans are used when inventory is low and demand is high, as is the case now, she has seen them dwindling because foreclosures are down.
She recommends them to first-time homebuyers who have the patience, but Marc Fisette, an Eastford-based home inspector who previously did FHA consultations, feels differently. He does not encourage 203(k) loans for young couples and first-time homebuyers because they "don't really know what they're getting into."
Tori Satti, a licensed loan originator with Gateway Mortgage Services, said the vision for the FHA program was reviving communities and making sure neighborhoods aren't forgotten.
She has found that millennials don't have much time after work to be renovating a bathroom or kitchen on their own, and that 203(k) loans allow them to buy a less expensive house but make it a newer-looking home.
"The market is so outdated right now," she said, "and it's really hard in one of the biggest purchases of your life to settle for shag carpet and mustard-and-green cabinets."