“The prices have been ridiculous,” a frustrated Amber Arriaga-Salinas said about land prices.
As the assistant executive director for Proyecto Azteca, a nonprofit organization helping families find affordable housing, she’s witnessed the names of hundreds of families linger on a homeowner waitlist for yet another year.
“Several years ago we could purchase a half acre at maybe $15,000. The highest would be $18,000. Right now, a half acre is going for $50,000 or more,” Arriaga-Salinas said.
Recently, she thought she found a good deal.
“I saw that there was an eighth of an acre for sale in rural Donna,” she said, “but that was $90,000.”
In a good year, Proyecto Azteca helped up to 15 families move into newly constructed homes with low mortgages and zero-percent interest rates. This year, only six were built.
As of now, they have funding to build three more homes, but rising construction costs and land values, combined with grant restrictions and construction regulations, have made it increasingly difficult to find eligible projects.
With poverty affecting almost a third of Rio Grande Valley residents, renting is a common option chosen by families priced out of homeownership.
“I would rent from place to place to place, and move us and move us. It was hard to do that with all my kids,” Sofia Flores, a mother of three, said recalling her time living on the move. “My children were young then when I was renting. Then they’d ask for the house back. Then I’d struggle to look for another place to live.”
Flores filled out an application with Proyecto Azteca in 2003. Years passed and a recession threatened the global economy four years later. But in 2010, Flores received good news from Proyecto Azteca.
“From that point on, my life changed completely,” Flores said about learning the construction for her home would soon begin. A small piece of property in Donna worth about $16,000 served as the foundation for her family’s new three-bedroom home.
Gone were the days when “the landlord would come and say, ‘You’ll have to leave in 30-days. We’re selling the house,’” Flores said.
At the time, Flores would sell clothes and employ her culinary skills to make and sell food to friends and neighbors to make ends meet. Her husband, a mechanic, always took the jobs that came his way.
It was hard to cover the rent, but now, they only manage a mortgage payment of about $350.
“Things are so difficult nowadays,” Flores said, “but owning a home is a blessing from God.”
About 800 families are still waiting for their call to get off Proyecto Azteca’s waitlist.
The first hurdle families must clear are the eligibility requirements attached with the county and federal funding that can keep some from qualifying for the assistance.
Lots used for construction must be in rural areas deemed eligible by the U.S. Department of Agriculture. Arriaga-Salinas uses a map to determine if a given location qualifies.
A prospective homeowner can be eligible even if they haven’t finished paying off the land.
“If a family owes money on their property, $15,000 or less, we’re able to do lot payoffs with a loan. Or if anybody has a lot that they’re interested in selling to us at a reasonable price, we’re also open to purchasing land,” Arriaga-Salinas explained.
The land must be in the right condition for construction and grant eligibility.
“There cannot be construction on it,” Arriaga-Salinas said. “We are allowed to build on a lot that has a mobile home, because we demolish the mobile home and then that’s considered new construction. But anything other than that can be very difficult.”
Once all the boxes are checked off for the prospective homeowner and their property, the organization faces hurdles to reach their goal, too, including construction costs, mortgage rates and an increase in surrounding home prices.
Wood-frame, single-family homes are built on concrete slat and range between two to four bedrooms and one or two bathrooms. Construction price increases have not spared nonprofit organizations.
“I checked, just on our three-bedroom home,” Arriaga-Salinas said. “And over the course of the pandemic, our three-bedroom home went up like 36% to date. We’re trying to keep it low. We’re trying to find other ways. We’re still very, very affordable compared to other builders.”
Proyecto Azteca budgets about $100,000 per home just for the construction, and that’s a best-case scenario.
Construction costs are expected to rise 14.1% by the end of the year, according to Global Commercial Real Estate Services, a real estate firm known by its acronym as CBRE. The average increase is only between 2% to 4% annually.
“What we’ve seen is that the producer price index has actually continued to increase,” Dr. Clare Losey, an assistant research economist for Texas Real Estate Research Center, said Friday.
The producer price index applies to suppliers of the products consumers buy. Lately, it’s been affected by supply shortages, backlogs at ports, reduced warehousing space, manufacturing delays and labor shortages, Losey explained.
Even when homes are available, the average price for a home in Hidalgo County — where the median household income is about $42,000 — is $225,500. In Brownsville, it’s closer to $260,000, according to the latest Texas Realtors report.
“As the demand for homes increases within a particular area,” Losey explained, “it’s not only going to raise the price of homes, but it’s also going to increase land prices.”
Population growth and an increase in the number of people moving in from other states to Texas affect the demand and decrease the volume of homes available, Losey added.
High mortgage rates also play a limiting factor in homeownership opportunities. Record-setting rates continued their upward trajectory this week, according to Freddie Mac, the main source for mortgage rates. At about 6.92% for a 30-year fixed rate mortgage, it’s the highest level since April 2002.
Counter-intuitively, the rate increase could decrease affordability so much that it could act as a balancing force in the near future.
“As of now, affordability has eroded, but in the long run,” Losey postulated, “if the reduction in demand for homes is sufficient, so to speak, because of the rise in mortgage interest rates, that could also cause home prices to decline.”
The last time we saw something like this was after the 2007 recession, Losey said. The effects of such recessions trickle down the economy. Though government officials have yet to declare a recession, certain indicators, like a labor shortage, lower family incomes and inflation, point to similar effects.
Even so, Proyecto Azteca holds out hope.
Ideally, land can be donated by a city or private benefactor to help families find housing.
“If the city were to donate that land, they have a brand-new home and the family is able to pay taxes,” Arriaga-Salinas said. “We make sure that the family is able to pay the taxes and insurance.”
Currently, the nonprofit has enough funding to build three more homes by the end of the year.
Families who qualify end up paying between $550 to $600 monthly for a mortgage with zero-percent interest, taxes and insurance included. They’re also asked to complete 200 ‘sweat-equity’ hours.
“They learn to do different things in construction, because that helps them in the future,” Arriaga-Salinas explained. “If they need to patch up a wall or change out a light switch, then they learn how to do that with our staff.”
Volunteers can also help when the prospective owner can’t fulfill the hours due to disability or age.
In the next year, Proyecto Azteca would like to build 13 new homes, if the housing market and economic conditions permit it.
“We have a great product, but it’s just making sure that all of the pieces fit together to be able to complete it,” Arriaga-Salinas said.
The wait for a steady mortgage payment and housing security can feel infinite for those on the waitlist, like it did for Flores, whose name once resided among those pages.
“It’s a long process, but hope is alive,” Flores said. “This program helps people in need so much. People on the waitlist just need to trust that their miracle will come at its time.”
