Down payment sums increase in Q2 2018

Homebuyers were making record high down payments on residences purchased in the second quarter of 2018, according to a recent analysis by the real estate data company ATTOM Data Solutions. The report also found that more homeowners were tapping into their equity while fewer were refinancing their mortgage.

The U.S. Residential Property Loan Origination Report found that buyers using financing to purchase a single-family home or condominium during the quarter made a median down payment of $19,900. This was the highest sum recorded since ATTOM Data Solutions began collecting information on the topic in the first quarter of 2000. It was up 19 percent from the median down payment of $16,750 in the first quarter of the year and a year-over-year increase of 18 percent from $16,925 in the second quarter of 2017.

This down payment accounted for 7.6 percent of the median sales price of homes purchased using financing during the second quarter of 2018. This was up from 6.6 percent in both the previous quarter and the previous year, and made up the greatest share of a purchase price since the third quarter of 2003.

Of the 103 metropolitan statistical areas included in the report, the high-priced markets in California had the highest median down payments. The typical buyer in San Jose put down a whopping $306,000, or 25.5 percent of the median sales price. This was followed by $220,000 in San Francisco (23.9 percent), $130,000 in Los Angeles (20.5 percent), and $115,400 in Oxnard-Thousand Oaks-Ventura (19.1 percent).

Several markets had median down payments exceeding $60,000. These included San Diego ($90,400, or 16.1 percent of the median sales price), Boston ($79,925, or 17.6 percent), and Seattle ($70,100, or 15 percent).

In Connecticut, buyers in the Bridgeport metro area who used financing during the quarter made a median down payment of $63,550 – 15.4 percent of the market's median sales price. Down payments were smaller in other markets in the state, with a median of $16,625 in Hartford and $16,500 in New Haven. Both down payments accounted for 7.2 percent of the median sales price of a home in the market.

The report found that many buyers were sharing the mortgage with at least one other person. A total of 17.6 percent of single-family home purchases were made by multiple, non-married people listed on the same deed. This was up from 17.4 percent in the first quarter of the year.

This trend was particularly prevalent on the West Coast. Nearly half of home purchases in San Jose—49.3 percent—were made with a co-buyer. A total of 39.1 percent of home purchases in San Francisco were made with a co-buyer, along with 31.8 percent of Honolulu purchases and 29.5 percent of Seattle purchases.

Co-buying gives the advantage of pooling resources, and the down payments made by those who purchased a home with at least one non-married partner were 51 percent greater than purchases by other buyers. The average co-buying transaction had a down payment of $63,117, or 16.3 percent of the typical purchase price, compared to a $41,749 average down payment accounting for 8.1 percent of the typical price among other buyers.

In Connecticut, 26.1 percent of the second quarter's transactions in the Bridgeport metro area were made by co-buyers, with an average down payment of $177,231 covering 24.7 percent of the purchase price. The New Haven metro area had a co-buying share of 20.7 percent, with the typical down payment of $53,846 in this group covering 17 percent of the purchase price. Co-buyers in the Hartford metro area accounted for 18.6 percent of the quarter's transactions, with an average down payment of $41,113 to cover 13.5 percent of the purchase price.

The report identified approximately 2.09 million loan originations secured by residential property during the second quarter of 2018, a 15 percent increase over the previous quarter and a year-over-year increase of 1 percent. ATTOM Data solutions based its report on publicly recorded mortgages and deeds of trust in 1,700 counties, which it says account for 87 percent of the U.S. population.

Purchase loans increased 39 percent from the previous quarter and 1 percent from the previous year to 926,516. Refinance loan originations fell to a four-year low of 799,093, a drop of 2 percent from the second quarter of 2017 and less than 1 percent from the first quarter of 2018. Home equity lines of credit hit their highest point since the third quarter of 2008, rising 2 percent year-over-year and 4 percent from the previous quarter to 361,845.

"Rising mortgage rates are continuing to cool demand for refinance originations, which were down to their lowest level since 2014 – the last time we saw more than six consecutive months with average 30-year fixed mortgage rates above 4 percent," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "Meanwhile buyers are upping the antes when it comes to down payments, evidenced by the record high median down payment for homes purchased in the quarter, and an increasing number of buyers are getting help from co-buyers."

Loans backed by the Federal Housing Administration were becoming scarcer, reaching their lowest point since the first quarter of 2008. This type of mortgage accounted for 10.2 percent of residential loan originations in the second quarter of 2018, down from 10.9 percent in the previous quarter and 13.5 percent in the previous year.

Veterans Administration loans were also on the decline, accounting for 5.4 percent of residential loan originations during the quarter. This was down from 6.2 percent in the first quarter of the year and 6.4 percent in the second quarter of 2017.

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