Thought of the Day: Could a Lending Meltdown Occur Soon?

The Big Short All Over Again?

Okay, before you get freaked out, I want to preface this blog by saying that these are just some thoughts I’ve been kicking around from analyzing the recent real estate market. So before you believe this could be the Big Short of Real Estate, take a deep breath and relax. I’m simply inviting you into a casual conversation about the mortgage market and where we are now…not necessarily claiming anything about its demise. I am very curious to hear your thoughts – please read on!

Here’s My Question:

Could the low down payment amounts for a home purchase (approved by lending institutions and obviously the government) possibly be creating a housing shortage? If all of these  buyers were taken out of the market until they saved 20% for a down payment would the housing shortage be here? 

I’ve purchased two homes in my life. (Without trying to age myself) I bought a home in 1987 and 1999 and both times I was required to have 20% down to purchase my home.

Lately in the Real Estate market in Reno, houses on the market are very scarce and it’s turning into a bit of a zoo. Once listed, they’re usually only on the market a few days before an offer – even multiple offers – are on the table. At the end of January 528 homes were on the market and we sold 400 of them!

Unlike 20 years ago when a 20% down payment was common place , nowadays a buyer can secure a loan with as little as 3% down, and with some grant programs, even lower.

I wonder sometimes…could a lending meltdown occur again because these buyers are getting into homes with “no skin in the game?

What’s Your Opinion? Please comment below!

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