Jacksonville, great area to invest in Real Estate.

With some finesse you can still buy into home market
So says a new study. And it's easier to do in Jacksonville than other parts of the state.
With traditional financing, Cece Harrigan might not have been able to afford a home. Last fall, the 26-year-old college student and first time home buyer had her eye on a $121,000 house, but knew that she couldn't keep up with the more than $1,000 monthly mortgage payments that her short credit history afforded her. It didn't help that median home prices in the Jacksonville area were more than 10 percent higher than a year before.


But like many home buyers, Harrigan, her Realtor and her lender were able to find crafty financing options that made the home affordable after all. She purchased it in October. Now, she's paying about $725 per month, less than $100 per month more than she was paying in rent before the move.
According to a recent study, Harrigan's story might be part of a national trend of offsetting high home prices with lower interest rates and creative financing that can allow people to buy higher-priced houses at rock-bottom monthly payments.
Home prices have shot up in recent years, but that doesn't necessarily mean that homes are less affordable. A report by The New York Times and Moody's Economy.com found that rising incomes and plummeting mortgage rates have made up for high home prices in most areas of the country, propping up the real estate market.
In the Jacksonville metropolitan area, the percentage of median income required to purchase a typical home is 19 percent, down from 20 percent in 1985, according to the study. The median is the point at which half of incomes are higher and half are lower. Nationwide, the average is 22 percent, down from 24 percent in 1985.
According to the report, First Coast housing costs hit their peak in 1982, when homeowners needed to use 27 percent of their income to pay for a home. Nowadays, Jacksonville is among the cheapest locations in the state, beaten by only the Tallahassee and Lakeland regions. But the area saw affordability fall three percentage points between 2004 and 2005. In Florida, Naples topped the list as the least affordable, with nearly 48 percent of a person's income needed to make house payments.
The study comes as many housing analysts portend the crash of the real estate market in the wake of sky-high home prices.
And on Thursday, the Florida Association of Realtors reported that statewide median home sales prices were up 31 percent to $250,500 in November from a year before. Jacksonville's median sales price was up 17 percent to $190,000. That's on top of steady increases throughout the year.
Despite the Moody's report, buying real estate on the First Coast is still tough for many families, said Millie Kanyar, a Realtor for Watson Realty's Fort Caroline office and the treasurer-elect of the Northeast Florida Association of Realtors.
"Low interest payments are keeping the prices affordable and allowing families to stick to a certain price range, but the real problem is finding houses in that range that aren't overpriced," she said. "I'm seeing many people stretching their income to the max in finding a house that they can afford."
Kanyar said that while some houses may be affordable for families at the moment, consistently rising interest rates will soon push those homes out of range, or worse, make payments unaffordable for a house that they've already purchased with an adjustable rate mortgage.
But, as a whole, new financing options have allowed home buyers to take out larger mortgages than they would have been able to do several years ago, said Tim Delp, the manager of the Northeast Florida region of HomeBanc Mortgage. That makes a higher-priced home appear more affordable by driving down monthly payments.
Although standard fixed-rate mortgages were prevalent in the 1980s, now homeowners can take out interest-only mortgages, adjustable-rate mortgages and mortgages with little to no down payment, he said.
"Over the last couple [of] years, we've seen a lot of innovative mortgage products," Delp said. "Options with a low down payment or even no down payment have made houses more affordable and increased homeownership in general."
And although interest rates will likely continue to rise, they probably won't reach the high levels that they hit in the mid-1980s, Delp said.
Local homebuilders also feel the mitigating effects of creative financing, said Mack Bissette, the CEO of SRG Homes and Neighborhoods, which builds about 35 homes per year in the Springfield area. Lower interest rates have allowed buyers to spend more money on a home than they used to, but that in today's real estate market, more money doesn't always mean more home, Bissette said.
"Prices for everything have gone up," he said. "Land costs have gone up. Labor costs are up. Materials costs are up. It costs more to build a home than it used to."
But even with broad mortgage options, real estate prices seem to greatly outpace rising incomes locally, said David Parker, a principal of Parker Associates, a Jacksonville-based real estate development marketing consultant.
"Mortgage options have certainly allowed a lot of people to go into a lot of debt," he said. "As interest rates rise, affordability will decline quite rapidly."
And while the Moody's index takes into account such things as financing options and average down payments, affordability indexes do not always agree with each other. For example, officials who manage the Housing Opportunity Index, conducted by the National Association of Home Builders and Wells Fargo, recently said that the third quarter of 2005 marked the least affordable U.S. market since they introduced the index in 1992.