RealtyTrac, a source for comprehensive housing data, released its first quarter 2015 U.S. Home Purchase Down Payment Report, which shows the average downpayment for single family homes, condos and townhomes purchased in the first quarter was 14.8 percent of the purchase price, down from 15.2 percent in the previous quarter and down from 15.5 percent a year ago to the lowest level since Q1 2012.
The report also shows that the average downpayment for FHA purchase loans originated in the first quarter was 2.9 percent of the purchase price, while the average downpayment for conventional loans was 18.4 percent of the purchase price.
The average downpayment in dollars was $57,710 in the first quarter, up slightly from $57,618 in the previous quarter and down slightly from $57,992 in the first quarter of 2014. The average downpayment in dollars for FHA purchase loans originated in the first quarter was $7,609, while the average downpayment for conventional loans backed by Fannie Mae and Freddie Mac was $72,590.
FHA loans as a share of loan originations increased throughout the quarter, from 21 percent in January to 22 percent in February to 25 percent in March.
“Downpayment trends in the first quarter indicate that first time homebuyers are finally starting to come out of the woodwork, albeit it gradually,” RealtyTrac Vice President Daren Blomquist said. “New low downpayment loan programs recently introduced by Fannie Mae and Freddie Mac, along with the lower insurance premiums for FHA loans that took effect at the end of January, are helping, given that first time homebuyers typically aren’t able to pony up large down payments. Also helping tilt the balances toward first-time homebuyers in the first quarter is less competition from the large institutional investors that have been buying up starter home inventory as rentals.”
Low downpayment share rises to nearly two-year high
The share of low downpayment loans — defined in the report as purchase loans with a downpayment of 3 percent or lower — was 27 percent of all purchase loans in the first quarter, up from 26 percent in the fourth quarter and 26 percent a year ago to the highest share since Q2 2013. Low downpayment loans accounted for 83 percent of FHA purchase loans originated in the first quarter, while 11 percent of conventional loans were low down payment loans.
“The growing number of low downpayment loans reflects an appetite on the part of lenders and the government to provide a format to grow the number of homebuyers, particularly first time buyers. Those numbers were running near record lows over the past couple of years,” said Craig King, COO at Chase International brokerage, covering the Lake Tahoe and Reno, Nev., housing markets. “The dangers of interest only, negative amortization, and low, low credit score loans are not a part of today's low down loan programs. These are the components that got buyers in trouble during the severe downturn. Without those types of high risk components, low down payment loans are a sound strategy.”
Share of low downpayment loans rises throughout the first quarter
The share of low downpayment loans was increasing throughout the quarter, from 26 percent in January to 27 percent in February to 29 percent in March, according to the report. The overall volume of loans also was much higher in March compared with the first two months of the year.
Although overall low downpayment loans increased as a share of all purchase loans in the first quarter, the share of conventional loans that were low downpayment loans decreased throughout the quarter, from 11 percent in January and February to 10 percent in March. Meanwhile, the share of FHA loans that were low downpayment loans increased throughout the quarter, from 83 percent in both January and February to 84 percent in March