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.”