@esmith
Mandatory 20% down payment for everyone would push disproportionate numbers of low-income families into rentals and disproportionate numbers of low-income houses into investors’ hands.
Investors have to come up with more than 20% because it is not owner occupied. At the same time it has to cash flow for the investor (including % relative to down). Getting a SFR to properly cashflow is hard, that is why very few REITS deal with them. On the other hand, MFR/apartments cashflow a lot easier. Investors will not really waste their time with SFRs unless they anticipate price increases in the properties.
NOTE: Remember, if people can use more than 80% financing, so can investors too… The more an ‘investor’ has to pony up on the purchase, the fewer units they can buy if they are able to cash flow.
What drives the prices up is something known as realizable demand. This demand is different than ‘wish’ or ‘dream’ demand. realizable demand means the desire to purchase and the ability to do so. If you cut realizable demand, prices will fall against constant supply (or in this case oversupply).
Another aspect of property is that if a person can’t save up for the 20% down, they are unlikely to handle emergencies with the home.. roof leak, water leak under the slab, etc.
High-income people can live frugal too. It’s one thing to make 3500/month after-tax and save 500/month, it’s another to make 7500/month and save 4500/month with the same standard of living.
Strawman argument and irrelevant.
1) if you are making $7500 a month, you have a greater percentage of income going to taxes. Therefore you will probably be saving much less than 4500 a month.
2) a person making 7500 a month will be saving for a much different house and will probably purchase a much different house than the person making 3500/month. They will have to come up with a larger down payment.
Yep.. because taxes are taking so much of the $7500/month
