BY JESSICA NELSON AND GABRIELLA BROWN
Real estate in and around Morgantown is expensive, and affordability is a barrier to many people looking to buy a house. White Diamond Realty’s snapshot statistics for 2021 put the average price for a detached home over $329,000 and the average price for a townhouse or condo around $215,000.
“I’m pretty sure there’s some artificial inflation going on in the housing market,” said Melanie Raleigh, “because everybody talks up, ‘oh, Morgantown, the University City, it’s good for growth and this and that, and because of that, we’re gonna charge 20% more than anybody else.’ ”
And those high prices have extended beyond Morgantown’s borders, to towns throughout Monongalia County and even over the border into Preston and Marion counties.
Melissa Hornbeck with White Diamond Realty has seen this “urban sprawl” in her professional experience, although she said she has no quantifiable data.
“People are sometimes surprised by the values immediately over the Preston County border, which could potentially be contributed to Mon’s elevated values,” she said. “Marion County appears to be in a surge of activity presumably due to ‘urban sprawl’ pushing people not previously in the market down to Marion County, where they get more for their money as opposed to Mon.”
Victoria Shuman at Howard Hanna said the high-priced “sprawl” is likely due to a shortage of homes for sale.
“Surrounding areas would be elevated due to a shortage of inventory,” she said, “creating price elevation in land costs and housing in the Morgantown area. This pushes activity out into surrounding areas, shifting those areas from a buyer’s market to a seller’s market.”
The affordability dilemma
The affordability dilemma comes primarily from the difference between home prices and household income. Monongalia County’s median household income for ages 25 to 44 is about $57,000, according to the U.S. Census Bureau’s 2019 American Community Survey, but 44% of households in the Morgantown-metro area bring in less than $50,000 a year.
At the median income of $57,000 — with no debts or other expenses — a person could afford a $375,000 house. But once other expenses are accounted for, that price goes way down. Expenses and debts like car payments (which Lending Tree clocks at an average of $563 per month), student loan payments (Investopedia says student debt averages at $37,500 per borrower, for a monthly payment of about $392) and health insurance (which, in West Virginia, can cost as little as $343 a month per person to as high as $1,127, according to eHealth, an authorized federal partner for finding health insurance).
Not including credit card debt and using only the lowest figure for the health insurance, total monthly debt equals $1,298.
Based on those numbers, a $57,000 annual income now only affords a person a $155,000 house with a $745 per month mortgage payment, if the payment is kept at the 43% debt-to-income ratio.
Thomas Board, with Fairmont Federal Credit Union, suggested debt-to-income ratio not exceed 43% of the consumer’s gross monthly income in order to stay within Qualified Mortgage guidelines.
But that price range — $100,000 to $200,000 — for a detached house is tough to find in Morgantown, according to Shuman. “Most likely,” she said, “the property will need quite a bit of work.”
NerdWallet, an American finance company that offers online resources and financial advice, suggests using the 28%/36% rule. This more fiscally conservative approach says “you shouldn’t spend more than 28% of your gross monthly income on home-related costs and 36% on total debts, including your mortgage, credit cards and other loans like auto and student loans.”
Using the same amount of total debt ($1,298) as the previous calculation but using the 36% debt-to-income ratio, a household bringing in the median income of $57,000 can afford an $80,000 house with a monthly mortgage payment of $412. These calculations are also based on an average credit score (630-689), a likely interest rate of 3.9%, a 20% down payment and include approximate property taxes and homeowners insurance.
Both figures — $155,000 and $80,000 — fall below current prices, both for detached homes and townhouses.
Breaking down the numbers
Sperling’s BestPlaces, which aggregates data from government and private organizations as well as from its own research, breaks it down further.
- 17% of workers make less than $15,000 a year (that number jumps to 26% inside Morgantown city limits)
- 5.5% (5.8% in the city), $15,000-$20,000
- 10.1% (12.7% in the city), $20,000-$30,000
- 9.5% (7.6% in the city), $30,000-$40,000
- 8.9% (7.2% in the city), $40,000-$50,000
A job paying West Virginia’s minimum wage ($8.75 per hour) will net a person about $18,000 per year, pre-taxes. We attempted to calculate how much house a minimum wage worker could purchase, using the lowest health insurance cost ($343) and the average car payment amount ($563), but not accounting for student loans for the monthly debt (for a total of $906).
However, NerdWallet blocked the screen with a message that read: “Debt is locking you out of homeownership … You should decrease your debt by $591 or increase your annual income by $19,700 to buy a home.”
NerdWallet would not allow us to make any calculations with an annual income below $50,767, accounting for a debt of $1,298 (car payment, health insurance and student loan payment). Someone making $50,767 a year could buy a $107,000 home, with $521 monthly payment, based on a 43% debt-to-income ratio. At the more conservative 36% debt-to-income ratio, the same annual income can only afford a $38,000 house, with a monthly payment of $225.
To buy a detached house in Morgantown (estimating the lower end of $300,000), NerdWallet’s reverse calculator recommends you make an annual income of $93,000 (also assuming you can put down the full 20% down payment at $60,000). Or, it says, “a lender might still qualify you” if you make at least $78,000 a year.
These numbers put homeownership out of the reach of more than half of Morgantown and Mon County residents.
From a lender to a borrower to-be
According to Thomas Board, a mortgage specialist with Fairmont Federal Credit Union, there are programs and financing options that allow a person to put down a smaller down payment.
“Typically, to be eligible for most mortgage financing options there are credit requirements,” Board said. “You do have to have a minimum credit score of at least 620, along with having at least three prior forms of credit experience with at least a 12-month repayment history on each debt.”
But if someone wants to put down less than the full 20%, the credit score requirement jumps to 660. “There are down payment requirements when looking at purchasing real estate ranging anywhere from 3%-20% down,” he said.
This is where Carolyn Brown, 31, hit a snag in her home-buying quest. “My credit kind of sucks,” she said. Brown and her boyfriend rent a townhouse for $950 a month. Combined, they bring in about $51,000 a year. She’s ready to buy a house, to have something that’s hers. But her credit score has kept them from looking into any financing options.
A good credit score can qualify a person for a down payment as low as 3%, but the cost is made up elsewhere. “If you’re only putting the minimum amount down [less than 20%],” said Board, “you will be required to have Private Mortgage Insurance (PMI).”
Beyond the sale price
Private mortgage insurance is an additional cost reflected on the monthly mortgage payment when someone can’t put down 20%. PMI, Board said, “oftentimes can be expensive, depending on the consumer’s credit score. I find that most consumers are OK with the PMI if that allows them to get their foot in the door with minimal out-of-pocket expense.”
Melanie Raleigh, 33, knows there’s more to buying a home than just the price of the house and the subsequent mortgage. “There’s also things like closing costs, where you have to hire lawyers and realtors to make sure that the deal is fair and equitable,” she said.
Closing costs, said Board, has to be paid out of pocket by the buyer, “are “a fee that the consumer would, in fact, have to pay out of pocket, “unless the sellers of the property … are agreeable in paying them on their behalf as negotiated in the sales contract. If not, the consumer could expect the closing costs to be around $3,000, plus or minus.”
And, according to Board, there’s also insurance. Before the loan can close, the homeowners insurance would have to be in place. Usually, the first year must be paid in advance, which can run $600-$1,200.
First-time help
“There are also first-time homebuyer options.” Board said. “The consumer could also be eligible for a down payment and closing cost assistance, as well, to help reduce their out-of-pocket expense.”
Dylan Sheldon, 28, and his wife were able to buy their first house thanks to a first-time homebuyer program. “My mother-in-law’s a real estate agent and she said, ‘you should talk to a banker about the first-time homebuyer,’ and I thought, there’s no way that I can buy a home, I don’t have any money.
“But I did have credit from starting to pay my student loans. So, I was establishing some credit. And with the first-time homebuyer, I was able to buy a house with no money down.”
Types of loans
There are different kinds of loans available. There are fixed mortgages (usually 30-year or 15-year) where the interest rate is the same throughout the life of the loan, or adjustable rate mortgages (ARM), where “the rate would be fixed for the first seven years then could adjust every year thereafter.” The fixed rate for an ARM depends on the lender, and can be locked in for one, five, seven or 10 years. There are other types of loans, as well, including VA and USDA.
“Take time to shop around for the best suitable financing options available,” Board said. “Ask for a loan estimate, which the financial institution can prepare to show a good faith estimate of potential costs associated with the proposed loan offer.”
Board offered some final advice: “Do not go online and apply with multiple financial institutions on their mortgage webcenter just to check rates or for pre-approval. In doing this, most websites will pull credit, which in turn will reflect a credit inquiry and could start to bring the consumer’s credit score down if they continue looking.”
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