Down Payments 50 Percent Lower Today than in 1989
According to an annual survey conducted by the National Association of Realtors (NAR), 88 percent of recent home buyers financed their home. Of this group, the median down payment was only 10 percent – 16 percent for repeat buyers and 6 percent for first time home buyers. The same survey conducted back in 1989, showed a median down payment of 20 percent for home buyers.
This means that the median down payment on a house has dropped by 50 percent in the span of less than 30 years. Among first-time home buyer respondents who said saving for a down payment was difficult, nearly half cite student loans as a barrier to putting more money down while 40 percent cite credit-card debt. 61 percent of buyers said the source of their down payment came from savings.
While homeownership is a goal worth pursuing, the NAR survey seems to indicate most recent homebuyers are purchasing a mortgage rather than a home. This kind of housing environment does not bode well for the long-term health and stability of the housing market or the middle to low-income Americans buying a home with very little money down.
This is the exact kind of environment the U.S. experienced just prior to the housing collapse in 2007-08 when over $9 trillion worth of home equity was lost and over 7 million Americans lost their home.
Federal government policy that attempts to expand homeownership through affordable housing goals via the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) should learn from their past mistakes. Loosening underwriting standards, lowering debt to income requirements, and backing mortgage loans with taxpayer dollars is the wrong approach to help Americans achieve homeownership.