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Category Archive: ‘Down Payments’

97% Down Payments

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.”

Posted by on Dec 15, 2014 in Down Payments, Mortgage News | 6 comments

NSDCC Investor Activity

The media keeps publishing their usual fear-mongering, wanting you to believe that as soon as the investors pull out, the real estate market will tank.

Here’s another:

It could be a factor in some of the lower-end markets, but there are plenty of first-timers and low-down-payment buyers being shut out by Big Cash.  They will have their chance if the investors bail, and may have to pay a little more.

How’s the investor action around NSDCC?

A review of 90 NSDCC detached-home sales that closed in the last 30 days in the $600,000 to $800,000 range revealed the following:

  • Based on the mailing address on the tax rolls, 79% of the buyers stated that they live there (21% have their mail sent elsewhere).
  • Of the 90 sales, 72 of them used at least a 20% down payment.
  • Of the 90 sales, 8 were all-cash, and five used at least 50% down.
  • Only five of the 19 non-owner occupiers paid cash.
  • Only two of the 19 NOOs were corporation/LLC names.
  • Six of the 90 were the retail end of a flip.
  • Seven were short-sales, and 2 were REO listings.
  • Eleven looked shady/seedy.
  • Seven included the buzz phrase “won’t last” or similar.

There might have been a handful of flippers or short-term investors in that group, but that sounds fairly normal.

Investor activity is in every market these days, but the vast majority of sales are completed by folks who are living there – and probably in for the long haul.  There are plenty of those still waiting too, so prices may ebb and flow, but if investor activity slows or stops, it will only give more owner-occupiers a chance to get in.

Posted by on Jun 5, 2013 in Down Payments, North County Coastal | 3 comments


Are long-time owners, mostly empty-nesters or elderly, finally moving on?  Or is it more of the recent peak purchasers who are cutting loose?

Of those who are selling now, when did they buy?

A check of the August transactions in North San Diego Couty’s coastal region (Carlsbad to La Jolla):

Sellers’ Date of Purchase:

Prior to 1984:  10

1985 – 1994: 16

1995 – 2003:  54

2004 – Present:  66

I thought there would have been more long-timers based on how many estate sales I’ve seen lately, but sellers don’t have to be long-time owners to be old.

Those who bought prior to 2004 ended up selling for more than they paid, though that doesn’t mean that they walked with money.  How did the sellers who bought since 2004 make out?

Gross Profit of Sellers who Purchased Since 2004 (commissions and closing costs not included):

Gained six figures: 11

Gained five figures: 15

Lost five figures: 13

Lost six figures:  27

There were some heavy losses too, fourteen sellers lost more than $300,000.

Here are the biggest losers:

The bank took a deed-in-lieu of foreclosure on their $2 million mortgage here, and sold for $1,200,000 less than the 2005 price:

Sellers lost their entire down payment – sold for $2.65 million less than their 2006 price:

There were 19 short sales and 5 REO sales, so about 40% suffered their losses personally.

Get good help!


Posted by on Aug 24, 2012 in Down Payments, North County Coastal, Sales and Price Check, Short Sales | 2 comments

Big Money

The local market is setting up for an extended period of quiet.

Buyers continue to use big cash deposits and are financing the rest at such low rates that their resulting payments should be very manageable. They must be in for the long haul.

Down payments of detached homes purchased in the last 30 days around the south side of NSDCC (La Jolla, Del Mar, Solana Beach, RSF, and Carmel Valley):

Down Pmts Used FHA 10% 15% 20% 25%-49% 50%-99% All-Cash Total
# of 1 3 2 18

There were 77% of the buyers who used at least 25% down payments in the last month.

The statistics on the 103 that closed:

Average SP = $1,435,771

Median SP = $1,200,000

Average square footage was 3,290sf

Average cost-per-sf was $472/sf   (figured by MLS)

Average days on market: 106

Average SP/LP: 95%

There were 12 trust/estate sales, 4 short sales, 7 REO sales, and 23 sellers who sold for less than they paid (or 70 that sold for more than they paid).

Posted by on Apr 22, 2012 in Down Payments | 4 comments

Average Down Payments

Hat tip to DOB for sending this in:

Here’s a corresponding article from the that correctly notes that the leading states have higher priced real estate that require bigger down payments:

“We are stricter with credit scores for buyers,” he said. “Our limit is 660 to 670 from FICO, while the F.H.A. will take lower, maybe down to 640. We also have tightened the debt-to-income ratio; we keep it at 45 percent of buyers’ projected income, and F.H.A. will keep it at 55 percent. But 5 percent money is out there, it is widely available” among banks.

Posted by on Jan 8, 2012 in Down Payments | 7 comments

Cash Homebuyers Increased

From NMN:

Nearly four out of every ten homes sold in 2011 have been purchased for cash on the barrelhead, according to a preliminary count by Housing Intelligence.

Despite record low mortgage rates for most of the year, 38% of all homes sold will be all greenbacks, no mortgage involved, HI reports. That’s up from 34% in 2010 and double the rate of all-cash deals recorded in 2006.

And the trend is likely to continue, at least in the near term, the research wing of the Hanley-Wood publishing company suggests, as long as investors continue to take down a big share of the properties for sale, especially in which the previous owner was in some sort of duress.

For the record, 20% of all housing sales in 2007 were for cash. In 2008, the figure jumped to 26%. And in 2009, it moved up again to 31%.



How did we do around San Diego County in 2011?

Price Range Cash Purchases Total Sales %%
$1.0 million+

I haven’t come across one buyer yet who had to pay cash because they couldn’t qualify for a loan. 

Posted by on Dec 27, 2011 in Down Payments, Market Conditions | 10 comments

Levels of CV Doom

A couple of comments were left yesterday regarding the financial stress among Carmel Valley homeowners – people who are under-employed and burning through 401k accounts to survive.

How many homeowners are stressing in 92130?

The data isn’t readily available, so you have to use your imagination.

Doom, Level One:

This article states that about twice as many people are delinquent as those who are in foreclosure (defined as more than 30 days late but haven’t received a foreclosure notice):

Let’s extrapolate – there are 68 SFRs in 92130 that are currently on the NOD or NOT lists.  Doubling that makes another 136 who are delinquent, and 68 + 136 = 204 houses in trouble today.

If there are a rolling 200 houses or so on the distressed list, we should be fine.  There were 58 detached short-sale or REO listings that sold in 2010, and 61 have already closed this year.  So if we’re ramping up to 70-90 distressed sales per year, and we keep selling 300+ total houses each year, the blend should be tolerable.  The servicers will dole out the free rent as needed, push for short sales, and regulate the flow to keep the balance.  Hopefully.  If a renegade servicer floods the market, then we’ll get to test my theory that prices could go up.

According to the tax rolls, there are 9,647 SFRs in 92130, so the 204 makes for roughly 2.1% of Carmel Valley homeowners that are now at risk of losing their house.

Doom, Level Two:

What about the under-employed that are still making their payments, but whose time/money is running out?  Plug in your own guess as to how many people are in that category, but first let’s note that probably 10% of the houses don’t have a mortgage – so let’s use 8,682 for those SFRs with mortgages.

Unemployment in San Diego County is roughly 10%, but counting the under-employed, let’s use an arbitrary factor of 20% who will have to sell (assuming none of them can find enough work in the coming years).

8,682 x 20% = 1,736 houses with mortgages that could be distressed.

To predict how long it could take to clear 1,736 distressed sales, let’s examine how many of the recent sales have been distressed, or somewhat-distressed.

A review of the 72 detached MLS sales closed over the last 60 days:

Brand new: 2

REO: 8

SS: 8

Less than 10% equity: 9

More than 10% equity: 45

There were 35% of the total sales that we can call distressed, but just because you had equity doesn’t mean you weren’t feeling it.  There were 32 of the 72, or 44% who sold for a loss, so even if they had plenty of equity they must have had some duress to sell for less than they paid. 

I think we can say that at least a third, and probably half of the current sellers are under some pressure to sell.

There have been an average of 35 houses sell per month this year, so let’s call 17 of those at least somewhat-distressed.  If there are 1,736 to work through, then 1,736/17 = 102-month supply – or 8.5 years to clear the market. 

Homeowners in CV tend to hang on as long as possible, and with the generous free-rent programs being employed by the can-kicking lenders, will the next 5-10 years be an orderly marketplace?  I think so – I think half of the recent sellers probably needed to sell, and not only have sales been orderly, the pricing has held up too.

Once the stronger hands have replaced those forced to move, it will leave a solid marketplace full of long-term residents who probably won’t be thinking much about selling.

Doom, Level Three:

An interesting note while counting the number of houses – 64% of the carmel Valley SFRs were built prior to 2001.  Generally there is no correlation between age of home and distress, but CV is known for it’s long-time owners.  How many of those with plenty of equity will be leaving town in the coming years, and add to the supply?

Doom, Level Four:

Are there enough buyers who are willing and able to keep paying this year’s average $329/sf?

Of the 72 buyers, there were 17% who paid all-cash, which is about the same as it’s been lately.  Financing terms today are extremely attractive, and the relative shortage of quality inventory could be masking actual demand.  Will the troubles around the world permeate into the better markets and undermine sales and pricing, or drive a flight to quality?

Doom, Level Five:

Natural disasters, civil unrest, political ineptitude, etc. could all cause a meltdown, but just a slow, but steady descent in pricing could cause more defaults by those who are comfortable now.  If you are the type who worries a lot, you can let your imagination go crazy in Level Five.


As long as there are buyers willing to maintain the current levels of sales and pricing, we should be able to work through the distressed sales as they are dripped out to us – keeping us at Level Two. 

Should the servicers cut loose and increase the foreclosure activity by 25% or more, and flood the market with additional short-sale and REO listings at very attractive pricing (under today’s), we could see a surge in sales – if there is pent-up demand.  But who knows how crazy it could get with today’s political climate – did you see the opinion piece in the WSJ suggesting that Obama should decline a second term, and let Hillary Clinton be the candidate?

Posted by on Nov 21, 2011 in Carmel Valley, Down Payments, Market Conditions | 20 comments

Down-Payment Check

The original thought behind examining the size of down payments was to get a feel for the buyers’ intentions – figuring that if they put down a healthy chunk of change, that they probably planned to live there long-term.

But it also helps illustrate who is buying – people with substantial funds available.

Here are the down-payment stats for the Carmel Valley, Del Mar, Solana Beach, and RSF detached sales for June – where the average price was $1,391,764, at an average of $415/sf:

Amt of Down Pmt Number of Sales
0-19% 6
20% 14
25% 7
30-50% 10
51%+ 5
Cash 6

Short sales: 5

Bank-owned sales: 2

Number sold for less than the sellers paid:  18 (37.5%)

Sold before MLS input: 2

So far this month, 44% of the buyers are using at least 30% down payments on very expensive properties.  Yes, the lenders are demanding bigger down payments, but the fact that people have the dough, and are willing to invest it in spite of the headlines, is a healthy sign.

It helps identify the competition for the top-quality properties too – where you will likely be bidding against people with ample horsepower.  Strategize accordingly.

Posted by on Jun 21, 2011 in Down Payments | 10 comments

Minimum 20% Down?

From Nick at the

Banking regulators are pushing for mortgage-lending rules that require homeowners to make minimum 20% down payments on loans classified as lower-risk, according to people familiar with the matter.

The proposal is being floated as a way to rewrite the rules for mortgage lending to prevent a rerun of the housing bubble and financial crisis that resulted from years of easy credit. The Dodd-Frank financial overhaul law enacted last year enabled regulators to define a so-called gold-standard residential mortgage that would be exempt from costly new rules.

At least three agencies—the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency—back a proposal to require home buyers to put down at least 20% of the sales price in order to obtain one of these “qualified residential mortgages.” One proposal would also require borrowers to maintain a 75% loan-to-value ratio for refinances, and a 70% loan-to-value for cash-out refinances in which the borrower refinances into a larger loan, according to people familiar with the matter.

Mortgage-finance giants Fannie Mae and Freddie Mac would also be exempt from the rules while they remain in conservatorship, according to these people. The U.S. took over the firms in 2008, and the Obama administration has proposed eventually winding them down.

The behind-the-scenes debate over the proposal could have far-reaching implications for how Americans finance loans, because it addresses how much equity new borrowers should have in their homes.

Read More

Posted by on Mar 3, 2011 in Down Payments, Mortgage News | 54 comments

Haves and Have-Nots

From the

Cash talks. And it’s speaking loudly in California real estate these days, even in the nicest parts of town.

All-cash buyers grabbed a record 30.9% share of the Golden State’s houses and condos in January as low prices lured investors and others, according to San Diego research firm DataQuick Information Systems.

Cash activity has been brisk for months in foreclosure-ridden areas such as Riverside and San Bernardino. But now, the cash buyer has become a major player in Southern California’s most expensive communities, where cash deals account for as much as two-thirds of home sales.

The trend is being driven by several factors, analysts say, including the difficulty of getting a “jumbo” loan from lenders still stinging from the mortgage meltdown. It also reflects speculation by wealthy investors who believe home prices are at or near a bottom.

“A lot of people think housing will outperform other financial investments,” said Andrew LePage, a DataQuick analyst. “This is just a place to park their money.”

In the Southland’s $1-million-and-up market, 29.2% of buyers paid cash last year — the highest percentage since 1994, DataQuick statistics show. For homes selling for $5 million and up, 62.2% paid cash.  Overall, cash deals constituted 27.8% of Southern California home sales in 2010, the most since DataQuick began tracking the market in 1988. It’s also more than double the 13% average for cash sales over the last decade.

The shift toward cash purchases started when foreclosures became a significant factor in the market, said Gary Painter, director of research at the USC Lusk Center for Real Estate. That’s because investors buying properties on the courthouse steps don’t go looking for mortgages.

“There have always been all-cash investors who think they can go in and flip a home,” he said.

There’s just more of them now. Cash buying has reached fever pitch in parts of Orange County, where the Balboa community of Newport Beach saw the highest percentage of sales going to cash buyers last year of any $1-million-plus Southland community — 66.7%.

Chris Crocker, a Coldwell Banker broker in Corona del Mar, said well-heeled buyers are using cash to acquire investment properties and second homes or to better their portfolios.

“Buyers are looking out 10 years, and buying a trophy property for 40% off its price” before the housing downturn, Crocker said.

Within a five-mile radius, his office closed 24 all-cash deals in the $5-million-and-up price range in the last six months.

“The smart money is ahead of the game and buying before the summer selling season when they will have competition,” he added.

Read More

Posted by on Feb 28, 2011 in Down Payments | 49 comments