Home Buying Gets Easier as Down Payments Dip

Home Buying Gets Easier as Down Payments Dip

FILE PHOTO: A real estate sign advertising a new home for sale is pictured in Vienna, Virginia, U.S. October 20, 2014.  REUTERS/Larry Downing/File Photo
Larry Downing
By Beth Braverman

One hurdle to first-time homebuyers is starting to get a little lower: The average down payment for a home fell to less than 15 percent in the first quarter of 2015 to its lowest level since early 2012. The average down payment for the quarter was $57,710, according to RealtyTrac.

The lower down payments reflect new loan programs recently introduced by Fannie Mae and Freddie Mac, and lower insurance premiums for Federal Housing Authority Loans. The market is also adjusting as large, institutional investors who had been buying starter homes as rental investments dial back.

Related: U.S. Homeownership Dips, But Household Formation Rises

“Down payment trends in the first quarter indicate that first-time homebuyers are finally starting to come out of the woodwork, albeit gradually,” RealtyTrac vice president Daren Blomquist said in a statement.

Broken down by type of loan, the average down payment for conventional loans was 18.4 percent ($72,590), and the average down payment for FHA loans was just 2.9 percent ($7,609). FHA loans as a share of all mortgages increased from 21 percent in January to 25 percent in March.

Among the country’s largest counties, Wayne County in Detroit, Mich., had the lowest average down payment (12 percent), and New York had the highest (37 percent).

While lower down payments are good news for first-time homebuyers, they also are a reminder of practices that led to the housing bubble that began to burst in late 2006 and contributed to the financial crisis. During the height of the boom, buyers were able to purchase homes that they couldn’t really afford by putting little or no money down on the property.

Chart of the Day: High Deductible Blues

By The Fiscal Times Staff

The higher the deductible in your health insurance plan, the less happy you probably are with it. That’s according to a new report on employer-sponsored health insurance from the Kaiser Family Foundation and the Los Angeles Times.

Chart of the Day: Tax Cuts and the Missing Capex Boom

Construction cranes tower over the base of the 30 Hudson Yards building, Wells Fargo & Co.'s future offices in New York
REUTERS/Brendan McDermid
By The Fiscal Times Staff

Despite the Republican tax overhaul, businesses aren’t significantly increasing their capital expenditures. “The federal government will have to borrow an added $1 trillion through 2027 to pay for the corporate tax breaks,” says Bloomberg’s Mark Whitehouse. “So far, it’s hard to see what the country is getting in return.”

Chart of the Day: 2019’s Lobbying Leaders

Chung Sung-Jun/Getty Images
By The Fiscal Times Staff

Roll Call reports that trade, infrastructure and health care issues including prescription drug prices “dominated the lobbying agendas of some of the biggest spenders on K Street early this year.” Here’s Roll Call’s look at the top lobbying spenders so far this year: 

Can You Fix Social Security? A New Tool Lets You Try

iStockphoto
By The Fiscal Times Staff

The Congressional Budget Office released an interactive tool Wednesday that shows how some widely discussed policy changes would affect the long-run financial health of the Social Security system.

“This interactive tool allows the user to explore seven policy options that could be used to improve the Social Security program’s finances and delay the trust funds’ exhaustion,” CBO said. “Four options would reduce benefits, and three options would increase payroll taxes. The tool allows for any combination of those options. It also lets the user change implementation dates and choose whether to show scheduled or payable benefits. … The tool also shows the impact of the options on different groups of people.”

Click here to view the interactive tool on the CBO website.

Why Prescription Drug Prices Keep Rising – and 3 Ways to Bring Them Down

Consumers are sounding off about the downside of generic drugs
Abid Katib/Getty Images
By Michael Rainey

Prescription drug prices have been rising at a blistering rate over the last few decades. Between 1980 and 2016, overall spending on prescription drugs rose from about $12 billion to roughly $330 billion, while its share of total health care spending doubled, from 5% to 10%.

Although lawmakers have shown renewed interest in addressing the problem, with pharmaceutical CEOs testifying before the Senate Finance Committee in February and pharmacy benefit managers (PBMS) scheduled to do so this week, no comprehensive plan to halt the relentless increase in prices has been proposed, let alone agreed upon.

Robin Feldman, a professor at the University of California Hastings College of Law, takes a look at the drug pricing system in a new book, “Drugs, Money and Secret Handshakes: The Unstoppable Growth of Prescription Drug Prices.” In a recent conversation with Bloomberg’s Joe Nocera, Feldman said that one of the key drivers of rising prices is the ongoing effort of pharmaceutical companies to maintain control of the market.

Fearing competition from lower-cost generics, drugmakers began over the last 10 or 15 years to focus on innovations “outside of the lab,” Feldman said. These innovations include paying PBMs to reduce competition from generics; creating complex systems of rebates to PBMs, hospitals and doctors to maintain high prices; and gaming the patent system to extend monopoly pricing power.

Feldman’s research on the dynamics of the drug market led her to formulate three general solutions for the problem of ever-rising prices:

1) Transparency: The current system thrives on secret deals between drug companies and middlemen. Transparency “lets competitors figure out how to compete and it lets regulators see where the bad behaviors occur,” Feldman says.

2) Patent limitations: Drugmakers have become experts at extending patents on existing drugs, often by making minor modifications in formulation, dosage or delivery. Feldman says that 78% of drugs getting new patents are actually old drugs gaining another round of protection, and thus another round of production and pricing exclusivity. A “one-and-done” patent system would eliminate this increasingly common strategy.

3) Simplification: Feldman says that “complexity breeds opportunity,” and warns that the U.S. “drug price system is so complex that the gaming opportunities are endless.” While “ruthless simplification” of regulatory rules and approval systems could help eliminate some of those opportunities, Feldman says that the U.S. doesn’t seem to be moving in this direction.

Read the full interview at Bloomberg News