Real Home Ownership Costs Unchanged Since Boom

Undervalued risk, created by financing privileges and loopholes - including no-money-down mortgages - fueled the housing bubble and subsequent bust. A new study seeks to create a more comprehensive metric for home ownership costs, and explain why the market has not yet bounced back despite record-low home prices and mortgage rates.

The real costs of home ownership have remained static since the housing boom, according to a new report, despite the bottoming out of home prices. Larger down payments and tighter restrictions on lending are requiring homebuyers to commit the same level of income to a purchase as they would have before the market crashed.

Lax down-payment requirements from 2000 to 2006 reduced borrower costs by around 15 percent, according to the study, performed by Andrew Davidson and Alexander Levin of mortgage consulting firm Andrew Davidson & Co. Tighter standards since then, however, have raised costs by 22 percent, canceling out the benefits of lower interest rates and even tanking home prices.

Most lenders today ask for 20 percent down at minimum, though loans through the Federal Housing Administration are still available for as little as 3.5 percent down. Borrowers during the housing boom, in contrast, often bypassed down payments altogether with the help of government backed-loans and assistance programs.

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