Wednesday, February 23, 2011

Demand for Bigger Down Payments Driving More People to Rent

Down payment requirements are at their highest levels since the late 90's, giving a boost to the apartment rental market a recent survey concluded.

The Wall Street Journal reported on the fact that higher down payments are shrinking the pool of homebuyers.

The median down payment in nine major U.S. cities rose 22% last year on properties purchased through conventional mortgages.  The rate represents the highest median down payment since the data was first tracked in 1997 and is double than the rate recorded three years ago.

Banks began charging high rates to increase buyers’ exposure to loss and reduces the impact of declining prices, according to the Journal. During the housing boom many home owners were required to put little to nothing down to purchase their homes.  Some submitted false or inaccurate data to support their loan requests, and later formed a class that came to be called "liars' loans."

Concurrently, home prices in the Northwest continue declining.  In the last year home prices in Portland fell 7.8% and in Seattle prices were down 6%.