"Nothing Down" Makes a Comeback: So Much For Increased Lending Standards

  While I never trust statistics from the National Association of Realtors, I do enjoy reading their realtor surveys. One important question from the June survey was "If the buyer obtained a loan, what percent was the down payment?" Here are the results:

Buyer did not make a down payment                  14%

Buyer made a down payment of 1% to 2%           3%

Buyer made a down payment of 3% to 6%          38%

Buyer made a down payment of 7% to 10%          9%

Buyer made a down payment of 11% to 20%       21%

Buyer made a down payment of 21% to 99%       16%


   That's right :14% of home buyers purchased a home without a down payment (and you thought banks had raised their lending standards). More importantly, 55% of home buyers put less than 7% down. The reason there is a large number in the 3-6% area is because FHA usually requires a 3% down payment. You would have thought that banks and mortgage lenders would have learned by now that it is important for home buyers to put up at least 10% down. This way they have some skin in the game and are less likely to default on a loan. Evidently, financial institutions have learned nothing from the whole real estate market collapse and subsequent financial crisis. I tried to confirm these results from a realtor I know in the Chatsworth, California area, and was told that it is possible to  purchase a home without a down payment, but you have to have good credit. In my opinion, these kind of stats how  vulnerable the US housing market is to any further decline in home prices. How many home buyers in the no down payment category are willing to endure negative equity? My guess is not many, and the same can be said for people in the 3-6% category. Talk about weak hands! These people will simply walk away and contribute to the bloated housing inventory.

Black Swan Insights    

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4 comments:

  1. Saturday,August 7,2010----
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    Dear blogger at "Black Swan Insights"
    stock market
    blog :

    Hello !

    SIMPLY GREAT ARTICLE here !
    Wow !
    I REALLY,really liked it.
    Well done !


    This article makes me think about
    "The Big Picture" view,trend or result
    regarding HOUSING in the USA,
    and its EFFECT on the recovery
    from the recession
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    in the NEXT 2 years,ESPECIALLY with the
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    in the USA !

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    The PatrickGannon1938 Stock Market Blog.

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    Replies
    1. Its about time to require a bigger down payment.

      Delete
  2. Sunday,August 8,2010----1:07am/Pacific Time
    to 1:14am---7 minutes work.
    ______________________________________

    Dear blogger at "Black Swan Insights"
    stock market
    blog :


    Hello !

    Nice article !

    However------there is ONE little
    mathematical error !

    It should read :

    "More importantly 55%
    (NOT 41% !!!)
    of home buyers put LESS THAN 7% down."

    Big difference !

    By the way,
    i definitely agree with the commentary
    and
    analysis in this article !

    Take care of yourself,
    AND
    your Family,
    Have a great AND profitable 2010,

    In Good Karma I Completely Trust,
    Hope you enjoy and PROFIT immensely from my articles,insights,Ebooks,postings,wisdom,
    experience,etc.
    in 2010 AND beyond.


    Sincerely AND profitably yours,
    PatrickGannon1938's Stock Market Blog,
    Patrick Gannon,
    Vancouver,B.C.,Canada.
    Sunday,August 8,2010.


    In the end,
    i want to be very HEALTHY,wise,friendly, generous,loved,wealthy,
    intelligent and funny !
    (Don't you ???) :>)

    Don't sweat the small stuff
    ----The choices you make
    dictate the life you will lead.

    To find out a little more about me,
    please READ (or print out) :

    http://seekingalpha.com/user/512100/instablog/full_index


    (Recommend this link-----PLEASE !!!)


    (Bookmark this blog
    OR
    add it to your favorites
    on YOUR computer !)



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