'If we don't get started...we will have more than a crisis on our hands'
The Mill at Broadway, central Sacramento’s largest infill housing development, has begun offering mortgage loans with no down payments, hoping to entice more young first-time buyers who don’t want to pay high rents, but don’t have cash for upfront payments on a house, its developer said.
The densely packed project – expected to eventually have 800 to 1,000 homes – occupies the former site of a lumber mill just south of Broadway near Interstate 5. Since it opened 20 months ago, The Mill has sold 175 units, mainly to young singles, said developer Kevin Smith of Ranch Capital, a Southern California-based investment company.
The next batch of housing under construction includes some detached residences, some two-unit buildings, and some six-story buildings, each with one flat per story. Those will include elevators for older buyers “who are not as enamored with stairs,” Smith said.
The new housing will be priced from the high $200,000s to the low $600,000s, he said.
While the prices are billed as affordable by Sacramento’s recently escalating real estate standards, the typical down payment requirements and closing costs make homebuying impossible for many, especially members of the millennial generation, Smith said.
“There are a number of qualified people who may have just graduated and gotten their first state job, and have some student debt, so they don’t have a big nest egg to put down, and they are not from a family where Grandma and Grandpa can write a check for down payment,” Smith said.
Smith said his goal is to sell to people who have “reasonable financial circumstances” which will enable them to make monthly mortgage payments, even if they don’t have money to put down.
The Mill at Broadway is one of several infill projects underway in the neighborhoods surrounding downtown, along with McKinley Village in East Sacramento, Crocker Village in Curtis Park, The Creamery in Alkali Flat, and the Bridge District in West Sacramento. There are also a variety of tightly packed urban housing projects going up along R and Q streets in midtown.
Smith said his development team has discovered a high number of buyers at The Mill have pets. The project team plans to build a dog park as part of a larger public park on-site, as well as an urban farm and a public market building with retail. Smith said the construction dates for those will be announced soon.
The no down payment loan, part of a Federal Housing Administration program, is available only for loan amounts of $424,100 or less, said Nick Peters, of the Mill project developers lending partner, Finance of America. The program involves a first and second mortgage. The second mortgage is forgiven for most buyers if the owner stays in the home for at least three years.
Peters said the program allows more people to buy homes, but he said his company prefers to get buyers to put at least 3.5 percent cash down, and get into a more conventional loan that has lower rates, below 5 percent, than the no-down payment loan, where the blended rate is slightly above 6 percent.
Sacramento City Councilman Steve Hansen, who has been pushing for more housing in the central city, called the no-down payment program an “entry point” for some people, in the right circumstances, to achieve more housing stability instead of paying rents.
The Mill is offering virtual online tours of the new home plans.