Posted by Leonard Steinberg, president of COMPASS,  on June 20th, 2015

Two aspects of the last recession…..low down payments and speculators…..are back.

Mortgages offered by lenders that have down payments of 10% or less are becoming more common:  In the first quarter of 2015, 51% of home buyers with a non-jumbo mortgage (more than 136,000) made a down payment of 10% or less on a home, compared with 48% in the same quarter a year ago and 46% at the recent low in the third quarter of 2013. Lower down payments are the key to luring Millennial buyers into the marketplace.

In this regard New York City is rather insulated whereby most financed properties require a 20% downpayment. Most new developments require 20-25% down upon signing, a sure-fire way to discourage big risk-taking by those who cannot afford to do so….and a healthy protection mechanism to prevent buyers in contract to walk away from their contracts in the event pricing were to drop.

While the traditional speculator has all but disappeared from the New York real estate market because of tighter buying and lending standards, I get a bit concerned at the volume of wealthy speculators/investors: is it a problem that so many high priced apartments are being sold to people whose sole ambition is to re-sell at a profit or rent these properties as an investment?  With a shortage of quality rental properties, this actually may not be a bad thing at all, unless of course the market gets over-supplied with too much of the same or similar types and price-points of apartments. It is possible that high end condominiums will have to adjust to a higher percentage of renters in their buildings.

The good thing about wealthy speculators is that most of them can afford to weather storms.