Homebuyers are facing a “record high” requirement for down payments on new home purchases during the Biden-Harris administration, primarily due to significantly elevated interest rates resulting from inflationary monetary and economic policies.
“The typical down payment for U.S. homebuyers hit a record high of $67,500 in June, up 14.8 percent from $58,788 a year earlier,” according to an Aug. 28 news release from real estate brokerage Redfin.
The cost of down payments has been steadily rising year over year, with June marking the 12th consecutive month of increase, according to a report by The Epoch Times.
The surge in down payments is exacerbating the ongoing affordability crisis in the housing market during the Biden-Harris administration. Data from the National Association of Realtors (NAR) shows that in June, the monthly payments required to afford a median-priced existing single-family home were $2,303, nearly double the $1,206 needed in 2021.
Monthly payments now account for more than a quarter of an individual’s income. To qualify for a median-priced home, an income of $110,544 is necessary, up from $57,888 when former President Donald Trump left office.
Rising mortgage rates are a key factor driving up home loan costs. Rates have increased from 3.01 percent to seven percent and have since decreased from their peak in late October. As of the week ending August 29, the average rate for a 30-year fixed mortgage was 6.35 percent. The Federal Reserve began hiking rates to address inflation under Biden-Harris and two years of full Democrat control of Congress.
Redfin attributes the rise in down payments to current market conditions where higher-priced, turnkey homes in desirable neighborhoods are more likely to be sold. The median price of a U.S. home reached a “record” high of $442,525 due to elevated home prices and mortgage rates requiring buyers to make larger down payments.
“Investors are still coming in with all-cash offers on homes that need to be renovated. Traditional buyers are putting up large down payments to try and lower their mortgage payment,” said Annie Foushee, a Redfin agent in Denver. “These buyers will often utilize the help of family members to put down more than they could on their own.”
In June, homebuyers typically made a down payment of 18.6% of the home price, marking the highest level in over ten years. Additionally, nearly 60% of buyers paid more than 10% of the property price as a down payment during that month, as reported by The Epoch Times.
More than 30 percent of home purchases in June w
ere made all-cash, up from last year. Redfin Senior Economist Sheharyar Bokhari noted that the “percentage of all-cash sales generally follows the same trend as the rise and fall of mortgage rates. When rates are down, the percentage of all-cash sales is down too, and the opposite is true when rates go up.”
“That means we may start to see all-cash purchases level off a little now that mortgage rates have started to come down from recent highs,” Bokhari added.
In the first quarter of this year, Barnstable Town, Massachusetts, led U.S. metros with the highest median down payment percentage at 23.6%, according to real estate data provider ATTOM.
Naples-Immokalee-Marco Island, Florida, and San Francisco-Oakland-Hayward, California also had down payment rates exceeding 23%.
Moreover, Los Angeles-Long Beach-Anaheim, California; Boulder, Colorado; Santa Rosa, California; and Oxnard-Thousand Oaks-Ventura, California reported down payment percentages above 20%.
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