Homebuyers’ down payments rise as US house prices climb – ET RealEstate

LOS ANGELES: Even with mortgage rates hovering near all-time lows, rising home prices are putting more pressure on buyers to come up with a bigger down payment.

In the April-June quarter, the median down payment on a single-family U.S. home was $13,955, a 15.3% increase from a year earlier, according to industry tracker Attom Data Solutions. In the first three months of 2020, it vaulted 29% from the same period in 2019.

The trend follows a steady climb in U.S. home prices this year. As of August, they were up 5.2% from a year earlier.

The rise in home prices is stretching the limits of affordability for many Americans already struggling to save for a down payment.

“Home values are increasing approximately twice as fast as typical incomes,” said Chris Glynn, senior economist at Zillow. “There’s this divergence between home values and the salaries and incomes that buyers have to keep up with that.”

That divergence shows no signs of easing, given the combination of extremely low inventory of homes on the market and fierce competition as more millennials look to transition from renting to owning.

Demand for homes has been strong this year, despite a brief slowdown in the early days of the pandemic. Sales of previously occupied U.S. homes surged 9.4% in September to a seasonally adjusted annual rate of 6.54 million, according to the National Association of Realtors.

That sales pace was the highest since February 2006, the peak of the last housing bubble, and left just 2.7 months of available homes on the market, a record low.

The thin inventory of homes helped drive up the median selling price to $311,800, up 15% from a year earlier, according to NAR.

A closely watched measure of home values, the S&P CoreLogic Case-Shiller 20-city home price index, has also been clocking rising home prices. In August, its most-recent snapshot available, prices climbed 5.2%, accelerating from a 4.1% gain in July.

Ultra-low mortgage rates have been a key driver for the housing market. The average rate on a 30-year fixed-rate mortgage was at 2.81% last week, little changed from the all-time low of 2.80% the previous week. The rate averaged 3.78% a year ago.

While low mortgage rates have made monthly home loan payments more affordable, they don’t alter the fact that most down payments are indexed to some percentage of the sale price of a home. So, higher prices lead to bigger down payments.

“The second side of that coin is that getting into the position where you have a down payment for a home to begin with has continued to get more difficult,” Glynn said.

How much a buyer opts to put down on a home can vary widely, depending on their mortgage. Some government-backed home loans require as little as 3% down, while homebuyers who want to avoid paying private mortgage insurance premiums will put down at least 20%.

The average U.S. median down payment has ranged between 10.6% and 11.8% going back to 2014, according to data from Realtor.com drawn from 35% of mortgage transactions nationwide.

A recent analysis by Zillow underscores how costly it can be to save up for a 20% down payment on a home these days. The real estate listings and data company found that it would take nearly eight months for a U.S. household making the median annual income of $83,675 to save up the $51,981 needed for a 20% down payment on a $259,906 home. That home price is based on the average of the middle-third of the housing market.

Apply the same calculus to San Francisco, with a median home price of $1.11 million, and it would take 17.1 months to come up with the $222,733 down payment on a median income of $156,373. In contrast, homebuyers in Cleveland have a more manageable hurdle, needing a little over five months’ worth of the median income of $78,731 to pull together the $33,387 down payment on a $166,936 home.

The housing market’s trends point to higher home prices and, as a result, a longer road to saving for a down payment. Home prices have to come down or incomes have to rise sharply to ease the financial pressure on buyers.

In terms of home prices, at least, that doesn’t seem likely. Zillow expects the price of a typical U.S. home to rise 7% over the next 12 months.

“What that means is an additional $3,600 toward a down payment for the median U.S. home,” said Glynn. “That means you have to save an additional $300 a month over the next year just to keep up.”

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In US, ‘cancel rent’ movement gains ground – ET RealEstate

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LOS ANGELES: Without a job and terrified of being left homeless during the coronavirus pandemic, Manuel Acero had no other option but to enlist in the US Army.

His distraught wife Ady Carrillo stayed behind in the studio apartment they rented in Los Angeles, but the 48-year-old isn’t just awaiting his return home — she’s taking action.

Carrillo has joined the “Cancel Rent” movement, which is gathering steam with protests across the United States as Americans hit hard by the coronavirus pandemic pile up debts.

Activists want landlords to suspend rent obligations for those in the most dire straits, having lost their jobs in the economic chaos sparked by the virus crisis.

Like the 31-year-old Acero, who is now at boot camp, many have been forced to resort to extreme measures.

“It’s been three months since we were able to make rent — the only choice my husband had left was to join the army,” Carrillo told AFP, bursting into tears.

“I’m scared they’ll send him away from me” on an overseas deployment, she said. “If he dies, I die with him.”

– Housing as ‘human right’ – With tens of millions of Americans out of work because of the pandemic, federal, state and local authorities temporarily suspended evictions on tenants who cannot make rent.

But many worry about what happens when those concessions run out.

Over the past week, the Los Angeles County Sheriff’s Department has resumed evictions ordered before March when the lockdowns began, local media have reported.

In the city’s Chinatown neighborhood on Monday, a small group of protesters including Carrillo rallied and marched on City Hall, demanding answers.

“Cancel rent!” “Housing is a human right!” community organizer Annie Shaw yelled into a megaphone.

“We demand strong measures like canceling rents,” Shaw said. “Canceling rent will protect the community.”

Los Angeles has the sixth-highest rents in the country, according to a ranking by the real estate site Zumper, trailing behind cities like San Francisco and New York.

“It’s been so hard for me to make rent during the pandemic,” said Rosa Hernandez, who also attended Monday’s rally.

“I am an independent cleaner, and used to make $700 a week. Now I make only $100 to $200 a week. If there is food on the table, there is no extra money for rent.”

– ‘We are not going to pay’ – Demonstrations and “rent strikes” by the “Cancel Rent” movement have been staged in various cities across the country since the start of the virus epidemic, which has so far left more than 164,000 Americans dead.

“We are not going to pay,” said Lydia Nicholson, an organizer of the LA Tenants Union.

“I don’t think it’s going to be pretty at all for anyone if they make us do something that we just obviously can’t do.”

Los Angeles prosecutors have said large-scale rent forgiveness is out of the question, and would cost the city more than $1 billion in compensation to landlords, according to a memo seen by the Los Angeles Times.

Mayor Eric Garcetti’s office did not respond to an AFP request for comment for this story.

For their part, landlords say freezing rents would not only affect the upkeep of their properties but would also impact the payment of taxes, which are key to the city budget, as well as mortgages.

Suspending rent payments is “just shifting the debt up the food chain,” said Jay Martin, director of a group that represents owners of rent-controlled properties in New York.

He said that many landlords “are working with [tenants], they are forgiving parts of the rent.”

“A tenant that can pay partial rent is better than a tenant who can pay no rent,” Martin said.

But the situation only appears set to get worse as federal supplementary support of $600 a week for the unemployed has now expired.

“I’ll have to go sleep under a bridge,” said Joaquin Gutierrez, 63 who has been out of work since February.

Gutierrez had been planning on returning to his native El Salvador when the coronavirus broke out and left him stranded in the United States.

Now, he does not have money to buy food, much less the $500 needed to pay the rent on his room in LA’s Van Nuys neighborhood.

“The only solution is for me to leave,” Gutierrez said, calling on the government of El Salvador to repatriate him.

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