January 7th, 2019 3:30 PM by Richard Sardella MLO.100007700/NMLS 233568
Smaller down payments trending in homebuyer purchases nationwide:
For those looking to buy a home in 2019, saving for a down payment is no doubt the hardest part. That, along with finding just the right home at the right price in the right location. The gold standard for down payments has been 20% of the purchase price for decades. According to the 2018 Zillow Group Consumer Housing Trends Report, however, only 43% of buyers nation-wide are putting down 20% or more. Almost one-fourth of buyers (24.2%) put down only 5% or less.
While putting 20% down on a mortgage allows buyers to avoid mortgage insurance as well as keep monthly payments lower, the seven years it usually takes to save it up (for the average priced home) is becoming less attainable for today's home shoppers.
Millennial buyers – the largest group all – are the most likely to use multiple funding sources for their down payment, with 51% saying they used a gift or loan from family or friends for at least a portion of their down payment, accounting for about one-fifth of the down payment on average. They also tap investments and retirement accounts.
70% of buyers nationwide use up savings for at least some portion of their down payment, while 39% say their down payment funds came from a previous home sale, which typically accounted for about 20% of the total down payment.
Zillow analyzed five major metro areas – Atlanta, Chicago, Washington, D.C., Phoenix and San Francisco – for buyers' decisions regarding down payments and found that Atlanta and Phoenix had the smallest share of buyers (around 30%), putting the full 20% down on a home. 44.5% of buyers in Atlanta and 36.9% of buyers in Phoenix are only putting down 5% or less. Meanwhile, buyers in Chicago, San Francisco and Washington, D.C., are at least as likely as the typical national buyer to put down 20% or more.
A surprising fact to come out of this study is that the median mortgage payment in both Phoenix and Atlanta is $1,131 a month, lower than the median mortgage payments in Chicago ($1,336), Washington, D.C. ($1,850), and San Francisco ($2,158)—but buyers in the three metros with higher monthly mortgage payments are more likely to put down 20% or more than those in areas with lower payments.
Source: BUILDER, TBWS
How Rates Move:
Conventional overnment (FHA and VA) lenders set their rates based on the pricing of Mortgageand G-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are trending sideways this morning. Last week the MBS market improved by +23 bps. This was enough to move rates slightly lower last week. We saw high rate volatility throughout the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Trade Wars, 2) The Fed and 3) Geopolitical.
1) Trade Wars: Trade negotiations between U.S. and Chinese officials, which take place today and tomorrow in Beijing in the hope of reaching a deal during a 90-day truce between President Trump and his Xi Jinping. But China is not the only trade story as the U.S. will be meeting with the EU Trade Commissioner on Wed and Japan's Trade Minister this week as well.
2) The Fed: We have a big schedule for talking Feds this week which include the Minutes from the last FOMC Meeting where they "dovishly" increased their Fed Fund rate and we hear from Fed Chair Jerome Powell.
3) Geopolitical: Front and center is Brexit as the UK Parliament resumes debating the Brexit Withdrawal Bill. Of course, our own partial government shutdown and negotiations on that will also be grabbing headlines.
Treasury Auctions this Week:
This Week's Potential Volatility: High
Mortgage rates continued to push lower last week on a good deal of volatility. This week we could see continued volatility. The direction of rates will depend, in large part, on the outcome of trade talks with China and the speeches from the Fed.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.