TheMReport — News and strategies for the evolving mortgage marketplace.
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26 | TH E M R EP O RT FEATURE R ecent evidence suggests that while the hous- ing market has largely recovered from the 2008 mortgage crisis, nearly a decade later, a new problem may be emerging: a lopsided market. Because housing prices have recovered at a faster pace than wages, low- to moderate-income earners have disproportionately less buying power in the housing market than high-income buyers and investors. Simply put, the average American is struggling to overcome the very real obstacle of providing the necessary down payment for a home. Consider that millennials—the largest share of prospective home - buyers today—continue to struggle to save money; most have less than $1,000 in savings for a down pay- ment, according to industry surveys. Buyers' Biggest Hurdle W hile investors and high- income earners have the capital to easily produce the traditional 20 percent down pay- ments on homes, first-time buyers and low- to middle-class earners simply don't have the money. The median price for a home in the United States in April was $246,100, according to the National Association of Realtors. Using traditional loan options, that re- quires a down payment of around $49,000. With median household incomes hovering around $56,000, according to the most recent government reports, you can start to see the struggle. Even loan programs that allow for lower down payments, like FHA or VA loans, would require down payments of around $9,000— nine times what current millennials have saved. Never mind closing costs, which add thousands of addi - tional dollars to the amount needed to purchase a home. The inability to produce the up- front money required to enter the housing market is no indicator of the borrower's ability to afford the mortgage itself. Using the same me- dian housing price at current rates, a homeowner could expect an es- crow mortgage payment of around $1,700 when using a low-down pay- ment loan like FHA. That's only slightly higher the national average rent payment of $1,600. One study goes further— suggesting that in 42 states, a Show Them the Money Although a large swath of the population is eager to purchase a home, they lack the cash to land a loan. A well-designed down-payment assistance program can mitigate that. By Ed Robinson