Photo: Robert Clark

The US housing market is experiencing a perfect storm of affordability erosion.

Earlier this year home prices reached an all-time high, while interest rates are continuing to rise.

Many homeowners are staying in their homes longer, in order to hold onto their lower rate. As a result, there are fewer homes on the market and competition among buyers is fierce — driving prices upward, often above the listing price.

LendingTree, a leading online mortgage provider, offered potential homebuyers a glimmer of hope in a new report — the average amount of a down payment on a home is falling.

Here’s what that really means for buyers:

1. You will have to save less money to buy

Today, it takes the typical American homebuyer about seven years to save for a down payment. Saving less money for a down payment should shave off some time, which will get you into your new home faster.

Average down payment amounts decreased by nearly 10% in the third quarter of this year, falling from $52,480 to $47,265 nationwide. The savings may be just enough to turn some renters into homeowners.

“If high down payments have deterred you from buying a home in the past, now might be a good time to reconsider your options,” reads the report.

2. More buying power

Home price appreciation is slowing nationwide, even in many of the hottest markets. Many homeowners who have been on the fence about selling, may decide to sell.

“Waiting too long to sell could end up costing you, especially if this trend continues and home prices start to fall,” reads the report.

Sellers could be more agreeable about negotiating and more eager to sell quickly before interest rates rise and home values fall.

3. Less to borrow

Despite rising home prices, the average home loan amount offered to potential homebuyers fell around $28,000 from $285,903 in the second quarter of 2018 to $257,749 in the third quarter.

Borrowing less equates to a lower monthly payment, which puts money back into your pocket every month. The sooner you buy, the more money you could potentially save — interest rates are predicted to rise at least twice by the end of 2019.

“Rising rates translate to more expensive mortgage payments, which crimps affordability for would-be homebuyers. The increased rates adds to what is already a laundry list of obstacles facing buyers,” Stribling & Associates director of data and reporting Garrett Derderian tells Livabl. Stribling & Associates is a leading New York brokerage. 

LendingTree also debunked one of the most popular misconceptions about down payments which many buyers may have bought into.

The commonly held belief that a 20 percent down payment is required is not accurate. There are many loan programs that accept much lower down payments, even as little as 3 percent for some FHA programs,” Tendayi Kapfidze, chief economist at LendingTree, tells Livabl.

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