Many discussions have centred around the vulnerability of current home buyers to a house price correction because anecdotally we feel that they do not have the equity to ride out a 20%+ price correction. I wanted to see if that feeling was accurate and I found an annual study by the CMHC of people who intend to buy a personal residence in the next 12 months. This study was done in May 2006.
CMHC interviewed 400 people who intend to buy a home in the Vancouver area and asked them several questions about their intent. 3 of these questions centred around their downpayment. First the asked them about the size of their downpayment. Next, they asked about the source(s) of their downpayment. Lastly, they asked about the main source of their downpayment.
I found the results interesting. Keep in mind that this survey is not only first time buyers but it also includes existing home owners.
Have a look through these survey results and tell me what you find interesting. I found it interesting that nearly 1/2 of all home buyers are using 'unconventional financing,' that is, less than 25% downpayment. This proves what I suspected about current homebuyers and downpayment size - these people are extremely susceptible to a negative equity situation if home prices correct.
Click the image to enlarge.