Rising home prices drove up the average down payments on single-family homes and condos to a new record in the third quarter of 2017, according to the January 2018 Down Payment Report from Down Payment Resources.
ATTOM Data Solutions reports that down payments reached $20,000, up from $18,161 in the previous quarter and up from $14,400 in Q3 2016, to a new high as far back as data is available (Q1 2000). The average down payment of $20,000 was 7.6 percent of the median sale price of $263,000 for financed home purchases in the third quarter, up from 7.1 percent in the previous quarter and up from 6.1 percent in Q3 2016 to the highest level since Q3 2013 – a four-year high.
Down payments are expected to continue to rise as home prices appreciate in the new year. The report also found that 23.4 percent of all purchase loan originations on single-family homes in Q3 2017 involved co-borrowers – multiple, non-married borrowers listed on the mortgage or deed of trust – up from 22.8 percent in the previous quarter and up from 21.1 percent in Q3 2016.
“Buying a home has become a full-contact sport in many markets across the country, and buyers with the beefiest down payments – not to mention all-cash buyers – are often able to muscle out those with scrawnier savings,” Daren Blomquist, senior vice president with ATTOM Data Solutions, said in a statement. “Despite the increasingly competitive nature of homebuying, the number of residential property purchase loans nationwide increased to a 10-year high in the third quarter.”
The report found that loans backed by the Federal Housing Administration (FHA) accounted for only 12.9 percent of all residential property loans originated in the third quarter, down from 13.6 percent in the previous quarter and down from 13.2 percent in Q3 2016. Loans backed by the U.S. Department of Veterans Affairs (VA) accounted for 6.6 percent of all residential property loans originated in the third quarter, up from 6.5 percent in the previous quarter but down from 7.5 percent in Q3 2016. Down payments of all loans closed in November, including refinances and FHA and VA, averaged 20 percent, according to the Ellie Mae Origination Insight data.
In a separate interview, Blomquist said he expected the 2018 real estate market to be another slog for homebuyers.
“It’s going to be another tough year,” he said. “I do think conditions will improve marginally from 2017 as we do see more inventory come online, and that will help some markets more than others. Unfortunately, a lot of markets that have the least inventory also have the most barriers to entry for builders. I think that by the end of the year we will see some of the housing start numbers that we have seen trending up in the last few months will translate into more inventory; that’s going to be limited to places that have room to build.”
