Analysis of the impact of down payment assistance on the cost of buying a home— including the down payment and monthly house payments for a median-priced home in 513 counties nationwide—was released this week in a joint report by RealtyTrac® and Down Payment Resource.
The report, released at the National Association of Real Estate Editors 50th Annual Journalism Conference in New Orleans today, found that across all 513 counties analyzed, buyers using available down payment assistance programs can save an average of $17,766 representing 41 percent of a year’s wages compared to buyers who do not use down payment assistance.
The total savings breaks down to an average savings of $5,965 on the down payment for a median-priced home, and an average savings of $11,801 on monthly house payments over the life of the loan for a median-priced home.
The report combined public record sales deed data for single family homes and condos collected by RealtyTrac with average down payment assistance data collected from 2,477 down payment assistance programs across the country by Down Payment Resource along with the latest average weekly wage data available at the county level from the Bureau of Labor Statistics.
“Saving for a down payment can be difficult for prospective first-time homebuyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under,” said Daren Blomquist, senior vice president at RealtyTrac. “Even just a 3 percent down payment requires 14 percent of annual wages on average across the 513 counties we analyzed, and in 67 counties, a 3 percent down payment requires more than one-fifth of annual wages.”
“Homeownership programs not only help buyers overcome the initial cost of purchasing a home, but also produce a compounding positive impact on the homeowner’s saving and wealth-building capability,” said Rob Chrane, CEO at Down Payment Resource. “In fact, these programs are now the last frontier in the fight to preserve homeownership affordability. Rates are never going to be substantially lower, and home prices continue to trend higher.”
Markets with biggest down payment assistance savings
Markets where buyers using down payment assistance programs can realize the biggest total dollar savings compared to buyers not using down payment assistance were Kauai County, Hawaii ($80,148 total savings over the life of the loan); Placer County, California, in the Sacramento metro area ($78,539); San Francisco County, California ($77,411); Orange County, California in the Los Angeles metro area ($74,268); and Shasta County (Redding), California ($70,806).
Other markets with total savings of more than $50,000 over the life of the loan included counties in Miami, New Orleans, Seattle, Orlando, and New York.
“Any ability that buyers have to assist with current down payment requirements is positive—especially when we consider our region’s first-time buyers who are sometimes facing an uphill battle as to whether to continue paying escalating rents, or save towards a down payment on a home,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “However, Seattle’s housing market remains incredibly competitive and many buyers are either paying cash or have substantial down payments. These buyers are seen as lower risk than those using down payment assistance and are, therefore, more likely to win in a multiple-offer situation.”
Markets where buyers using down payment assistance programs can realize the biggest savings as a percentage of average annual wages compared to buyers not using down payment assistance were Kauai County, Hawaii (191 percent of annual wages); Shasta County (Redding), California (176 percent); Sevier County (Sevierville), Tennessee (161 percent); El Dorado County, California in the Sacramento metro area (160 percent); and Allen County (Lima), Ohio (157 percent).
“While down payment assistance programs are beneficial for assisting buyers in achieving the American Dream of homeownership, current low available housing inventory is creating an inability to leverage such programs to the benefit of buyers,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. “Couple current market conditions with certain sellers and agents restricting access to viewing of properties in consideration of marketing programs to create hyper-sensitivity regarding property availability, and we have what many are considering a potential environment of disparate impact relating to the inability of the Protected Class Buyers under the U.S. Fair Housing Act to leverage such down payment assistance programs in achieving their family goals of homeownership.”
Other markets with total savings of more than 130 percent of average annual wages included counties in Orlando, Los Angeles, Miami, Nashville and Memphis.
Average assistance covers 3 percent down in 82 percent of counties
Across all 513 counties, the average down payment assistance available through down payment assistance programs was $12,434, nearly twice the average 3 percent down payment of $6,424 on a median-priced home.
“These programs often make the difference between buying a home or not,” added Chrane of Down Payment Resource. “In most cases, the assistance results in a greater financial cushion by preventing homebuyers from liquidating their savings and retirement accounts to come up with a down payment.”
Average down payment assistance available was higher than a 3 percent down payment on a median-priced home in 422 of the 513 counties (82 percent), including Los Angeles County, California ($39,964 average down payment assistance compared to $15,450 for 3 percent down on a median-priced home); Cook County, Illinois in the Chicago metro area ($8,058 average assistance compared to $6,090 for 3 percent down); Harris County, Texas in the Houston metro area ($16,521 average assistance compared to $5,985 for 3 percent down); Maricopa County, Arizona in the Phoenix metro area ($19,067 average assistance compared to $6,750 for 3 percent down); and San Diego County, California ($25,262 average assistance compared to $14,460 for 3 percent down).
Markets where average assistance does not cover 3 percent down
Average down payment assistance was lower than a 3 percent down payment on a median-priced home in 91 of the 513 markets (18 percent).
Major markets where a 3 percent down payment on a median-priced home was higher than the average down payment assistance available included New York County (Manhattan), New York ($13,917 average down payment assistance compared to $34,500 for 3 percent down on a median-priced home); Fairfax County, Virginia in the Washington, D.C. metro area ($5,000 average assistance compared to $14,100 for 3 percent down); Salt Lake County, Utah ($5,313 average assistance compared to $8,078 for 3 percent down); Montgomery County, Maryland in the Washington, D.C. metro area ($4,680 average assistance compared to $11,550 for 3 percent down); and Baltimore County, Maryland ($6,173 average assistance compared to $6,210 for 3 percent down).
Other markets where a 3 percent down payment on a median-priced home was higher than the average down payment assistance available included counties in Philadelphia, San Francisco, Chicago, Kansas City, Des Moines, Portland, and St. Louis.