Prospective buyers of entry-level homes face the challenge of coming up with bigger down payments, according to data on the 25 largest metro areas compiled by Redfin.
The brokerage reports that the median down payment for the least-expensive 25 percent of properties sold in 2013 was $9,480 compared to $6,037 in 2007, the last year of the previous economic expansion. The median down payment rose to 7.5 percent of the sales price last year from a low of 3.1 percent in 2006. While the FHA offers low down payments, fewer first-time buyers are using the agency, which has raised borrowing costs and tightened underwriting. Last year, 39 percent of first-time buyers took out FHA loans, compared to 56 percent in 2010, based on data from the National Association of Realtors.
"The numbers tell the story of why we have millions of potential homeowners who are renters or living with their parents," says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School.