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Last updated on February 2nd, 2021 at 05:50 pm
The home prices in the suburbs and rural regions across America are soaring record-highs propelled by a mass exodus out of downtown city centers, it appears that Americans eager to purchase a home will now have to shell out a greater amount of money for a down payment amid a sudden tightening of credit standards.
According to a report compiled by Attom Data Solutions and cited by Bloomberg, the median down payment for a single-family home rose by 69% from the third quarter of 2019 to $20,775 in Q3 2020. This is the highest in nearly two decades.
The sudden increase in down payment costs over the past 12 months points to a shift towards the side of caution among lenders amid an increasingly worsening economic outlook.
Amid the pandemic confusion, lenders have become less optimistic about borrowers, resulting in further social distancing measures and lockdowns.
This will likely lead, to further limitations on economic growth heading into the fourth quarter and early 2021, with the potential of even a double-dip recession.
Indeed, the rising worry regarding an increase in delinquencies is not far-fetched, especially if economic activity leads to an additional rise in unemployment levels across the country.
As a result, JPMorgan Chase has recently tightened its borrowing terms. The bank’s loan officers were instructed to limit large loans to only 70% of the sale price for condos and co-ops in Manhattan.
In the meantime, amid record-low interest rates and a surge in migrations to the suburbs and rural communities loan applications have skyrocketed.
This sudden shift in home-buying behavior in turn has enabled mortgage companies to earn significant margins and collect ample amounts of cash amid the pandemic.
Reference Source: The Deep Dive
