IRVINE, CA—An improving economy with gradually improving wage growth is helping more buyers to pull together a sizable down payment on a home, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. According to a recent report from the firm, the median down payment for a home increased in Q3 to a new high of $20,000, up from $18,161 in the previous quarter and up from $14,400 in Q3 2016; the new high goes as far back as data is available, to Q1 2000.
We spoke with Blomquist about the factors enabling buyers to put down these larger down payments and what advantages this practice affords them.
GlobeSt.com: What is enabling buyers to offer larger down payments on homes?
Blomquist: An improving economy with gradually improving wage growth is helping more buyers to pull together a sizable down payment on a home. In addition, we continue to see a higher share of co-borrowers (23.4% in Q3 2017, up from 21.1% a year ago) on purchase loans, indicating that buyers are getting help in qualifying for loans from family, friends or others. Oftentimes, this help also would involve a contribution toward a down payment. Lastly, the higher down payments are a result of a market with limited inventory and still-tight lending requirements. Sellers have the luxury in this market of picking from multiple offers in many situations, and sellers are usually going to pick the highest and best offer that often comes with a higher down payment than competing offers.
GlobeSt.com: What advantages (other than lower mortgage payments) does this practice afford buyers?
Blomquist: It sets their offer apart from offers with lower down payments because a higher down payment typically indicates the buyer will most likely qualify for a loan, making it less likely that the deal will actually close and close on time. A higher down payment also creates a cushion in case the appraisal comes in lower than expected, which could trip up offers with lower down payments.
GlobeSt.com: Where do you see this trend going?
Blomquist: For the short term, I see down payments continuing to increase until enough inventory comes on line to match or even outpace demand. Certainly, a trend downward in down payments is a sign that demand is softening, and once we see a sustained downward trend or a dramatic drop in down payments, that would be an early indicator of a housing market correction.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
