Total Student Debt Could Buy Every House on the Market ... Twice

According to a new study by Realtor.com, total student debt could buy every house on the market in the US.. twice!

Part of this interesting article by Kelsey Ramirez is below:

"Total student debt in the U.S. reached $1.5 trillion, a new all-time high, according to a new study by realtor.com. But what does that mean for the housing market?

The number $1.5 trillion sounds like a lot, but how much is it really when you break it down? Divided out, the average student loan borrower owes about $34,500, that’s $8,500 more than the typical down payment of $26,000, or an average 10% of the median home price of $260,000.

Put another way, $1.5 trillion is enough to buy every single home on the market in the U.S. Twice.

Let that sink in.

“Student debt has ballooned to an all-time high as the price of education continues to outpace wage growth, and this is holding back many potential buyers from being able to purchase a home,” realtor.com Senior Economist George Ratiu said. “Student debt is already impacting borrowers’ ability to buy a home and education debt is expected to hamper consumers’ financial decisions for many years down the road.”

The Department of Education explained that because wage growth is stagnant compared to the rapidly rising costs of education, students are taking on more debt than ever before to cover their expenses. Since 1986, tuition at public universities has grown at four times the rate of wage growth."

See the link to the full article from Housing Wire.

Francis

Home Valuation tool

Detailed, local trends etc...

Current mortgage rates   - low.  It's a good time to buy now

Real Estate: Average Down Payment by State

The average size of down payments by state usually follows prices, as a rule of thumb. These figures tell us a bit more:

Down payments are:

Highest in California, with a 21.44% average DP (about $97.8k)

And                 Hawai, with a 21.32% average DP (about 69.9k)

Lowest in Alaska, with a 15.4 % average DP (about 36.4k)

And                 West Virginia at 15.4% average DP (about $21.4k)

And                 Mississippi at 15.8% average DP, averaging $22.9k.

This information is provided by the digital loan sourcing site LendingTree, and is reported by Alcynna Lloyd of HousingWire in her article dated Oct 26, 2018.

LendingTree also shows the following graph, which recaps the subject pretty well:

As always, thank you for reading, and share if you like!
Francis

Home Valuation tool

Detailed, local trends etc...

Current mortgage rates   steady...  (stock market volatility...)

Where Do People Get Money to Buy in California? Mom and Dad, Often.

Where do people get money to buy in California? Mom and dad, often.

I read this interesting article (with interactive map) on the KQED news website about the downpayments made for california purchases made with an FHA loan.  Granted, not all loans are FHA in California, especially in our local counties of Santa Clara and San Mateo. But for most of the rest of California, it is interesting to see that parents help with the downpayment of their kids' purchase.

The California Dream series is a statewide media collaboration of CALmatters, KPBS, KPCC, KQED and Capital Public Radio with support from the Corporation for Public Broadcasting, the James Irvine Foundation and the College Futures Foundation.

• KPCC crunched the numbers on more than 600,000 FHA loans, a type of government-backed mortgage that's common with first-time buyers.FHA borrowers can use money from relatives for their down payment. In recent years, that kind of family financial help has been on the rise in California.
• Back in 2011, about one in four FHA loans in California included down payment money from relatives. Today, it's one in three.
• Family down payment support is playing an even bigger role in many parts of California, outstripping the national rate of 26 percent. Last year, in dozens of California ZIP codes — covering parts of East San Jose, North Hollywood, South Central Los Angeles, Santa Ana and Alpine in eastern San Diego County — at least half of FHA borrowers were getting family members to help with the down payment.
• Parents are not just gifting down payments to their kids. They're also co-buying houses.A recent quarterly report
  
  from Irvine-based real estate data firm Attom Data Solutions found that 48 percent of houses purchased in San Jose had sales deeds that listed multiple non-married buyers (often an indication that parents are co-buying with their children). The same was true for 38 percent of homes purchased in San Francisco.

Thanks for reading,

Francis

Home Valuation tool
Detailed, local trends etc...
Current mortgage rates   (slight regular uptick)
A worthy local non-profit to remember: Second Harvest Food Bank Santa Clara County.

Not enough money for your downpayment?

Not enough money for a downpayment?

Let’s imagine that you really, really want to purchase a home, you have the income to do it, and you’re ready, willing and able (all 3 conditions that as Realtors we always check for).  But there is a little problem: you do not have enough money for the downpayment.

The typical options are: - to get some gift money (it’s got to be from a relative to be acceptable by the bank making the big loan), - or get a second, in the form of an equity line of credit (just making their come back now), - or win at the lotto...

There is however an other option, that I have personally never seen used, but that I just read about and is worth mentioning:

REX HomeBuyer, a form of shared appreciation (or depreciation).

The principle of this option is that a group of investors get together, and loan you money to help with the downpayment on our purchase.

If the property has appreciated when you sell it, they share in the profit.

If the property has depreciated when you sell it, they share in the loss.

This is a good option for people who need some help with a downpayment, and feel shy going it alone on their purchase; it is reassuring in a way to have someone else share in the risks of the market variations.  And all the while you own the house the advantage is that you have used the downpayment money to actually buy a home and live in it, - and for a lot cheaper than if you had to borrow the whole amount.  (remember that when you borrow a 90% amount on a house, you have to pay PMI –Private Mortgage insurance – and this is not cheap: about 1 to 1.5% of the amount you pay, every time you pay anything it seems).

In that option, you do not pay interest on the money that made the rest of the downpayment.  It is like having a friend co-buy with you but without the hassle to draw a complicated “separation agreement” for when you want to be on your own later. Here it is done from the start, in a clear way.

More on this interesting idea on this Los Angeles times article by Lew Sichelman.
As always with financial arrangements, run this by an advisor or an attorney if you are considering trying it...

Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit:  Our Brothers' Home

Gifts for downpayment...

Notice to givers of down payments...  please read on:

Home buyers trying to scrape together enough money to cover the typical 20 percent down payment frequently look to relatives for help. About 1/4 of first-time home buyers were looking for some help from the family for their downpayment (typically 20% of the purchase price). But mortgage lenders closely scrutinize cash gifts, and the check may not count toward a home purchase if the borrower can’t thoroughly document its source and intention.

There are some rules to know and to follow, and it is easy to understand once you think as a bank: if one takes too much of a loan, the risk of not being able to pay it back increases.  So the help with the downpayment cannot be another loan, in one form or another.

This article from the New York Times (by Lisa Prevost, published: December 27, 2012) is most interesting and also gives some pointers as to some of the tax implications.

As always, I advise my clients to talk to the specialist: the lender, and to do so ahead of time because it may take time to structure the transaction properly.  The first stop in buying a property is really and truly the lender, in my opinion.

Thanks for reading,

Francis Rolland

Silicon Valley Real Estate

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