Are those sought-after first-time homebuyers finally re-emerging? RealtyTrac said on Thursday that they may be the reason that the average percentage of down payments used to purchase single-family homes, condos, and townhomes in the first quarter of 2015 was at the lowest level in three years.
On average homebuyers put down 14.8 percent of their home's purchase price compared to 15.2 percent in the fourth quarter of 2014 and 15.5 percent a year earlier. This was the lowest average percentage for a down payment since the first quarter of 2012.
"Down payment trends in the first quarter indicate that first time homebuyers are finally starting to come out of the woodwork, albeit it gradually," said Daren Blomquist, vice president at RealtyTrac. "New low down payment 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."
Even at an average rate substantially below the traditional 20 percent buyers are making a substantial out-of-pocket investment. The average dollar amount put down was $57,710 compared to $57,618 in the previous quarter and a slightly higher 57,992 in the first quarter of 2014.
The average down payment on an FHA loan was 2.9 percent of the purchase price or $7,609 while conventional loan down payments averaged 18.4 percent or $72,590.
High loan-to-value (LTV) ratio loans - 97 percent or higher or with a down payment of 3 percent or less - made up 27 percent of purchase originations in the first quarter. This was a one percentage point increase over both the previous quarter and the first quarter of 2014 and was the highest share since the second quarter of 2013. Eighty-three percent of FHA purchase loans originated in the first quarter were high LTV and 11 percent of conventional purchase loans.
RealtyTrac pointed to several trends through the quarter. First, FHA loans represented a larger share in each month of the quarter, rising from 21 percent in January to 25 percent in March. Second, while overall low down payment loans increased as a share of originations through the quarter the low down payment share of conventional loans moved in the opposite direction, from 11 percent in January and February to 10 percent in March while the share of FHA loans that were low down payment loans increased throughout the quarter, from 83 percent in both January and February to 84 percent in March
Among the nation's 20 largest counties with down payment data available those with the lowest average down payment percentage were Wayne County (Detroit), 12.0 percent; Philadelphia County, (12.6 percent), Clark County (Las Vegas), 13.3 percent, Riverside County, California, 13.7 percent; and Maricopa County (Phoenix), 14.2 percent. The highest average down payments were in three counties in the metropolitan New York area, Santa Clara and Orange Counties in California. Markets with the highest percentage of low down payment loans in the first quarter included counties in Atlanta; Washington, D.C.; El Centro, California; Worcester, Massachusetts; and Charlotte and Greensboro in North Carolina while the lowest share of low down payments were in New York County, the Bay Area, and Kings County (Brooklyn).