Apparently, having money is no longer a prerequisite for purchasing a home. The NAR released a study this past Tuesday that showed only 43% of first time buyers put no money down. Even worse, of the 57% that put some money down, the median down payment was a miniscule 2%.
Does anyone not see the incredible risk inherent in this? These buyers have absolutely no “skin-in-the-game”. Nor do they have the financial aptitude to save any money at all. Years ago these ‘buyers’ would have been laughed at and told to come back with money to lay on the table. No longer! Purchasing a home has gone the way of the shady automobile dealer.
Bad Credit! No Money! Bankruptcy! C’mon down!
As housing prices soared last year, an eye-popping 43% of first-time home buyers purchased their homes with no-money-down loans, according to a study released Tuesday by the National Association of Realtors.
The trend is potentially ominous. The real estate market is cooling in some areas, and rates on adjustable-rate loans are creeping up. As a result, some no-money-down buyers could owe more than their homes are worth.
Already, home prices in many areas are declining, and the “For Sale” signs are hanging in front yards longer. There’s now at least a 50% risk that prices will decline within two years in 11 major metro areas, including San Diego; Boston; Long Island, N.Y.; Los Angeles; and San Francisco, according to PMI Mortgage Insurance’s latest U.S. Market Risk Index.
The result will not be pretty, I can promise you that.