Home buyers faced with tightened credit standards and skyrocketing prices are making the largest down payments in at least two decades.
At the same time, sales of existing properties rose in October for the fifth month in a row, reaching a level not reached since the property bubble burst 14 years ago.
According to a report by Attom Data Solutions, the average down payment for single-family homes and condominiums in the United States was $ 20,775 in the third quarter, the highest on record dating back to 2000. That’s 69% more than $ 12,325 a year before record-low mortgage rates spiked the housing boom.
Borrowers raised 6.6% of the average home sales price for the quarter, up from 4.7% last year and its highest level since 2018. The average loan amount for the quarter was the highest since 2000, at $ 275,500, up 24% from the previous year the third quarter of last year.
“Down payments are rising at a time when lenders are tightening their policies,” said Todd Teta, chief product officer at Attom Data Solutions. “Lenders have become more cautious to protect themselves from further defaults.”
Mortgage companies are slashing hard cash and making high margins amid the pandemic as consumers flock to buy homes or refinance loans to take advantage of record-low mortgage rates.
The average for a 30-year fixed loan this week fell to 2.72% – the lowest in nearly 50 years – from 2.84% last week, Freddie Mac said Thursday. The level a year ago was 3.66%.
The 15-year average of fixed interest rates reached 2.28% after 2.34% in the previous week. The five-year variable interest rate of 2.85% was below the 3.11% of the previous week. A year ago, the 15-year rate was 3.15% and the 5-year rate was 3.39%.
“Mortgage rates have hit another record low as investors face mounting uncertainty about rising Covid-19 cases and the weak economy,” said George Ratiu, chief economist for Makler.com.
Lenders, including JPMorgan Chase & Co., have tightened conditions for borrowers amid widespread concerns about economic growth. JPMorgan, for example, announced this month to loan officers that jumbo loans will be capped at 70% of the sale price for most Manhattan cooperatives and condominiums.
The typical borrower had a credit score of 786 for the most recent quarter, the highest median in the 1999 quarterly figures, according to data from the Federal Reserve Bank of New York.
$ 1.05 trillion in mortgage lending last quarter was the highest since 2003, New York Fed data shows, when homeowners across the country benefited from an earlier historic refinancing boom.
The National Association of Realtors announced Thursday that existing home sales rose 4.3% in October to a seasonally adjusted rate of 6.85 million annualized units. In view of the booming housing market, this number has increased by 26.6% compared to the previous year.
The 6.85 million figure is the highest for this data since February 2006 – the eve when the real estate market peaked and then collapsed.
Real estate agents and housing market experts have said that the housing market is in a different and healthier place than the last time sales were at this level. Historically low mortgage rates have drawn buyers into the market. The pandemic has also caused many families to look to other ways of life to reflect that many people are likely to be working remotely for the foreseeable future.
But the housing market is now entering the winter months, and with cases of the coronavirus re-emerging across the country, the housing market is more likely to pause in the coming months rather than rise any higher.
“We expect the pace of sales to slow in the fourth quarter, with a weak rebound, resurgent pandemic, and inventory depletion weighing on activity, although there may be further surprises in the uptrend,” said Nancy Van Housten, US chief executive. Economist at Oxford Economics
The average existing home price was $ 313,000, up 15.5% year over year, largely due to the nationwide existing home inventory being at or near record lows. The number of unsold homes is 2.5 months, compared to 2.7 months in September.
Information on this article was contributed by Prashant Gopal and Shahien Nasiripour of Bloomberg News, Ken Sweet of The Associated Press, and Michele Lerner of The Washington Post.