There’s been a lot of hullabaloo about the Fannie/Freddie decision to drop the minimum down payment from 5% to 3%.
But the 2% difference will have virtually nothing to do with the decision to default. If a homeowner is going to walk from a 3% down payment; they will walk from a 5% down payment too.
Shiller speaks in his usual ‘casual indifference’ here, but they didn’t cut his last point in the video – that historically the ‘slowing of appreciation has sometimes been the precursor to declines’:
According to recent data from the National Association of Realtors, first-time homebuyers account for just 33 percent of all home purchases. That’s the lowest level in 27 years.
“Maybe there’s a cultural change. Our millennials spend more time on Facebook than standing over the backyard fence and talking to the neighbor,” Shiller said, attempting to explain the drop in new homebuyers.
“Maybe neighborhoods are not as important. Or maybe there’s an urbanization trend going on.”
Whn you run out of qualified buyers….
I don’t think there will be large numbers of walk a-ways, the reason there were so many last bust is they built way too many new homes then sold them to people who could in no way afford them (No-Doc’s no-Down loans) (even money at closing loans).
The builders have been very conservative and they have not had the crazy loans.
Also I don’t think the millennial’s will be that much different than the previous generations, The biggest bulge of them just got out of college, let them digest that first real Job a few years.
It’s not facebook Shiller, it’s the lack of any substantial income growth especially within this demographic.
What happens when the purchaser who can only come up with 3% has a major repair come due?
This feels like they’re running out of options to prevent prices from falling. It’s the Bernanke Put of 2006 all over again. Put basically nothing down, if the appreciation increases enough re-fi out to lose the PMI. If it doesn’t, default, live rent free for a couple of years, then try again.
I’m sure it will end better this time.
*Chuckle* Gee, Jim, remember what I just emailed you about? I’ve always been a proponent of 20% down payments (always done it myself, including last home) until…
But have you been a proponent of “97% downpayments”?