Realtors’ summer rally cry: 100% financing available

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I posted yesterday on the problems with down payments -- the problems are, more and more lenders are demanding them and many first-time homebuyers don’t have them.

Now, comforting words from Washington: The National Association of Realtors is putting out the word today that rumors of required large down payments have been exaggerated: ‘Consumers across the country will have access to safe, affordable financing with down payments of only 5 percent on most mortgages, with 100 percent financing available on some loan products, and we could see an upturn in home sales this summer.”

Whew. For a second there, it appeared we might be returning to the olden days when people actually saved up money before purchasing a house. And paid cash for groceries.

The above comment is from NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, and was contained in NAR’s press release about existing home sales in April. (Headline from Reuters: ‘The pace of existing home sales in the United States fell 1 percent in April to a 4.89 million-unit annual rate, the NAR said in a report on Friday that was slightly better than expectations.’

As commenter Cal points out, the NAR said ‘restrictive lending practices hampered home buyers’ in April. This is an important statement. The NAR is saying credit is too tight. It is also saying easier credit is on the way.

Analysis: The idea that Americans will have to start saving money for a significant down payment before buying a house is probably a good idea -- it would put the concept of ‘ownership’ back in homeownership. But it bears no relation to the way American consumers behave. It will pass. Americans are not savers, and they are not encouraged by their government to save. The real estate industry needs buyers too badly to wait for Americans to rediscover a savings habit that has skipped at least one generation of consumers. The industry, and the government, will find a way to offer loan products that will not require large down payments.

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Warning to CD: More Laura Richardson coverage coming on the blog.
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