As rents increase, home buying carves a niche in State College

Thomas Pilato recently purchased a house on South Sparks Street for his son Noah to live in instead of renting.
Thomas Pilato recently purchased a house on South Sparks Street for his son Noah to live in instead of renting. nthomas@centredaily.com

Like many college students, Noah Pilato is growing accustomed to the responsibilities of young adulthood: cooking his own meals, putting aside time to study, listening when his alarm clock beckons. A midfielder on the Penn State soccer team, he also scribbles in hours of practice to an already-packed schedule.

But on Friday, Pilato, 20, added an unusual, if not ambitious, obligation to his list: homeownership.

Thanks to a non-conforming land use protected by borough zoning codes, Pilato’s name graces the deed of a two-story, four-bedroom abode on South Sparks Street. He will share the house with two of his teammates, who will in turn pay him rent. For the sophomore business major, it’s not a bad deal.

Pilato won’t get to keep the money, however. It will go to his parents, the property’s other owners.

Because his parents won’t live in the house — the family hails from the Washington, D.C., area — Pilato is required to be a part owner as per borough code.

“With the way rents are right now, we have kids packed in rooms together and the rents are exorbitant,” said Thomas, Noah’s father. “It makes financial sense because we’re going to have three kids living in here. It’s a better option for us rather than throwing money away.”

As rents continue to rise and student debt remains inexorable, parents such as Pilato’s are looking at buying homes in college towns as a way to save money. After their children leave school, they can resell the property, with some actually turning a profit. Compared with paying upward of $947 a month — the median rent payment in State College, according to the U.S. Census Bureau — a mortgage payment starts to look more reasonable.

“It’s becoming more common,” said Larry Walker, a Realtor with Kissinger, Bigatel and Brower. “By the time you get three or four students in an apartment and you start looking at a mortgage payment, it just makes sense to purchase.”

According to SmartAsset, a financial metrics company, a mortgage payment on a State College home can end up saving buyers money over a five-year period. For a $193,500 home — the median value for a Centre County residence, according to the census bureau — monthly payments can be just less than $800. By the time Noah graduates, for instance, the Pilatos may have already saved more than $3,500 — or comparable to a semester’s worth of housing on campus.

The idea to buy came to Thomas six years ago when his eldest son, Tyler, enrolled at Penn State. But a lengthy search turned up nothing. Single-family homes with student rental permits are scarce, Walker said, due to a movement away from them in recent years. A 2012 neighborhood perspective report reflected the trend; authored by community members, it called for a larger conversion of rentals to single-family homes.

With Noah, a stroke of luck helped the Pilatos secure his home for the next two years. The family had looked for a house for more than a year, coming across the Sparks listing by coincidence and with help from Walker. As it happens, the family who owned the house previously also had an owner-occupant student.

Bob Berrigan, the agent who brokered the sale for the previous owner, said the uncommon situation carries residual benefits. The students feel more responsible, he said, because they’re part owners. With out-of-town investors, the level of care for the home often isn’t the same.

“If I’m a student and an owner,” Berrigan said. “I’m going to make sure my roommates don’t trash my house.”

The bond market also provides inducements for buying. A recent Freddie Mac study found that last week’s mortgage rate was at its lowest since May 2013 and not far off from the all-time low. The 30-year fixed-rate mortgage averaged 3.48 percent, down from 4.08 percent a year ago.

An unintended consequence of the Brexit vote, which caused uncertainty in the markets, was lower interest rates. Ford McNutt, a lender with Professional Choice Mortgage, said he expects the rates to stabilize in the foreseeable future. In the meantime, however, the lower rates can be a boon for buyers.

“It means more affordability,” McNutt said.

For Noah, who celebrated a birthday about a week ago, it also means finally having his own room.

“He’s had roommates the past two years here, so now he’ll have his own bedroom and pay less money and have his own little space,” Thomas said. “It’s much better.”

Roger Van Scyoc: 814-231-4698, @rogervanscy