I think relatively few people have $100K to put down on a $500K home. I suspect the ones that are doing it currently are mostly:
1) Those that have sold and are using equity from the sale.
2) Those with access to funds from the Bank of Mommy and Daddy
There are two much smaller groups that also have $100K downpayments:
1) Very frugal savers
2) Very high earners (>$200K/year)
Even those in group #2 will have a hard time saving $100K, because they pay so much in taxes. And if they have their own business they pay even more in tax (double SS/medicare) than everyone else. Plus, these folks hang out with other high earners and are likely to feel pressure to drive Mercedes and pay for country club memberships, which of course makes it harder to save up that $100K downpayment.
Ask yourself how many people are really frugal savers here in Southern California. My guess is not that many. And how many are very high earners that are able to eschew all of the trappings of the Southern California high earner lifestyle long enough to save up $100K, in spite of the heavy tax yoke around their necks? Again, I don’t think there are that many.
Now, ask yourself this — when the news is bad almost every day and unemployment is rising, for those who have saved up that $100K, do they really want to spend it all to purchase a home? Or would they feel more secure having that money in the bank. Realistically they would need more like $150K in the bank to comfortably purchase that $500K home with 20% down and make sure they still have a good emergency savings fund.
I’m sure everyone on this board will tell me that there are hundreds of thousands of people here in San Diego with these $100K downpayments just waiting to throw them down on CV homes once they drop to $550K or so. Maybe you guys are all correct and I’m mistaken.
