Tuesday, February 15, 2011

Home Buying: A Return to 20% Down Payments?

by Bill McBride on 2/15/2011 08:43:00 PM

From Mitra Kalita at the WSJ: Banks Push Home Buyers to Put Down More Cash

The median down payment hovered around 20% in the late 1990s and began to creep downward in 2001 in the nine cities Zillow analyzed: Chicago; Stockton, Calif.; Las Vegas; Los Angeles; Miami-Fort Lauderdale; Phoenix; San Diego; San Francisco; and Tampa, Fla.

It fell as low as 4% in the fourth quarter of 2006, and in some markets came close to zero.
Little or no skin in the game matters for home buyers too. I think 20% down (10% with mortgage insurance) is not unreasonable. If someone cannot save 10%, are they really ready for home ownership? I think that question was answered a few years ago.