Financing that home purchase -- now vs. then
Near the peak of the housing frenzy four years ago, 75 percent of homes sold in the Baltimore metro area went to buyers with conventional mortgages -- loans not guaranteed or insured by a government agency.
Now? Thirty-five percent.
The share of buyers turning to FHA-insured mortgages has increased tremendously in these post-bubble, post-subprime times. Forty percent of Baltimore-area buyers went FHA in July, according to Metropolitan Regional Information Systems. (That's up from 2 percent in July 2005. Yeah -- 2 percent.) It's such a turnaround that FHA-financed purchases jumped ninefold from four years ago, even though total home sales fell by almost half.
Also up: VA loans, assumptions -- where the buyer takes over the loan held by the seller -- and owner financing. Of course, owner financing deals only rose from 1 to 4, so I wouldn't call that a trend. (Though it is a 300 percent increase ...)
And even in these recessionary times, some people (267 in July, to be exact) do have the means to buy a house with 100 percent down. Fewer people than four years ago, granted, but they represent a greater share of total sales: 12 percent, up from 7 percent in July '05.
One Wonk reader recently got a USDA-backed mortgage. Those loans are for purchases in rural areas that aren't necessarily as rural as you might think -- a fair swath of the Baltimore suburbs is eligible.
Have a financing story? Do share.
Comments
Great write-up! Very interesting.
Could you comment more on conventional mortgages? Or did you mean non-conventional? Or conforming?
Do you have an idea of what happened to those mortgages 4 years later: How many foreclosures, deliquencies, refinances, owner vs. investor, etc...?
Great article in The Sun BTW!
Posted by: "Little Debbie" | August 12, 2009 9:54 AM
These figures are purely about the ways buyers financed their purchases -- it's connected to the home sales data we see every month -- so there's no way to track what happened to those specific 2005 purchasers. But an unusually high share of loans made in '05 and '06 went bad pretty quickly.
"Conventional," in this case, is exactly as noted in the post -- everything that's not insured or guaranteed by Uncle Sam. That includes the conforming 30-year stuff as well as subprime, jumbo and all the variations of exotic loans that were once available.
Posted by: Jamie Smith Hopkins | August 12, 2009 10:00 AM
But if conventional means FNM/FRE, which does have a govnmt guarantee of sorts.
Further, I think conventional financing occludes subprime, jumbos, and exotic.
I read the link and that's what I came away with.
Are you certain that conventional mortgages include exotic, et al loans? Or how exotic of a loan will FNM purchase? Neg am?
My assumption is that we have 35% conventional, 40% FHA, 4% owner, and 12% cash would leave the rest as jumbo, subprime, portfolio loan et al.
Posted by: "Little Debbie" | August 12, 2009 10:33 AM
Actually, owner-financing is 4 as in four people, not 4 percent. A very small amount, in other words!
But back to the main point: conventional, from everything I've read, isn't the same as conforming. It means everything that isn't a government loan. I went searching for confirmation and found a number of places -- including www.bankrate.com/finance/financial-literacy/conventional-va-fha-mortgage-1.aspx -- which say that conventional loans may be conforming and non-conforming.
In any case, in July 2009, conventional plus FHA plus VA plus assumptions plus cash plus owner financing added up to 2,200 of the 2,240 home purchases. The rest? "Other."
Posted by: Jamie Smith Hopkins | August 12, 2009 10:45 AM