Homebuyers are making larger down payments as loan volume keeps falling

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Mortgage origination volume continues to decline as homebuyers receiving loans bring more money to the closing table.

The median down payment on single-family homes and condos purchased with financing reached its highest point since the data was first recorded in 2000's opening quarter, according to Attom Data Solutions. The second quarter of 2018 had a median of $19,900, up 18% year-over-year from $16,925 and up 19% from the previous quarter's $16,750.

"Buyers are upping the ante when it comes to down payments, evidenced by the record-high median down payment for homes purchased in the quarter, and an increasing number of buyers are getting help from co-buyers," Daren Blomquist, senior vice president at Attom Data Solutions, said in a press release.

The second-quarter down payment figure was 7.6% of the median sales price, marking the highest percentage in nearly 15 years. It's a rise from 6.6% of the median sales price both year-over-year and quarter-over-quarter.

Larger down payments mean homebuyers have more skin in the game and lenders are better protected against default. Lenders assume less risk, but it also results in smaller loan amounts that drive interest earnings and loan officer commissions.

While the median down payments reached a high-water mark, mortgage originations declined for the third consecutive quarter, as the drop in refinance activity overshadowed growth in purchase and home equity line of credit lending.

Over 1.5 million loans secured by residential property were originated in the second quarter, dropping 27% year-over-year and 16% from last quarter.

Purchase loans accounted for 926,516 of all residential loans originated, up 1% year-over-year and 39% from the previous quarter. Refinance loan originations fell to a four-year low at 799,093, down 2% from a year ago and less than 1% from last quarter.

There were 361,845 HELOC origination volumes, a 2% increase year-over-year and a 4% quarterly decline.

“Rising mortgage rates are continuing to cool demand for refinance originations, which were down to their lowest level since 2014 — the last time we saw more than six consecutive months with average 30-year fixed mortgage rates above 4%," Blomquist said.

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