Low Down Payment Borrowers Enter Housing Market
The S&P/Case-Shiller 20-City home price index has risen 5% in the 12 months through March and new home sales rose 6.8% in May from April.
That data indicates that many low-down-payment borrowers, including 1st-time home buyers are returning to the US housing market, boosting housing but raising concern among those who worry about the risk of such mortgages.
Sluggish wage growth and rising fees for loans with small down payments once pushed buyers away. But now fees have dropped for mortgages backed by the Federal Housing Administration (FHA). So more potential homeowners are willing to buy a home.
In Q-1, 51% of home buyers with a non-Jumbo mortgage paid a down payment of 10% or less on a home, compared with 48% a year earlier, according to the data.
Elsewhere on the housing front
Housing starts posted their best M-M readings in April and May since late Y 2007, a 1.04-M annualized rate in May and a 1.17-M rate in April.
Former Federal Reserve Chairman Alan Greenspan notes that the pace for new construction of both homes and commercial properties has not returned to the lofty levels that prevailed before the Y 2008 financial crisis.
“We have not come out of the bottom,” Mr. Greenspan said in a TV interview. “We are in the position now of secular stagnation” for real estate.
Before the 2007-09 Great Recession construction of homes and buildings expected to last for 20 years plus accounted for 8% of GDP. Now it is just 4%, Mr. Greenspan noted.
That is bad news for the overall US economy, because real estate construction played a Key role in each of the 10 rebounds from recession since World War II.
The housing picture is not rosy.
Stay tuned…
HeffX-LTN
Paul Ebeling
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