43% of first-time home buyers put no money down

WASHINGTON -- As housing prices soared last year, an eye-popping 43% of first-time home buyers purchased their homes with no-money-down loans, according to a study released Tuesday by the National Association of Realtors.

The trend is potentially ominous. The real estate market is cooling in some areas, and rates on adjustable-rate loans are creeping up. As a result, some no-money-down buyers could owe more than their homes are worth.

The median first-time home buyer scraped together a down payment of only 2% on a $150,000 home in 2005, the NAR found.

Already, home prices in many areas are declining, and the "For Sale" signs are hanging in front yards longer. There's now at least a 50% risk that prices will decline within two years in 11 major metro areas, including San Diego; Boston; Long Island, N.Y.; Los Angeles; and San Francisco, according to PMI Mortgage Insurance's latest U.S. Market Risk Index.

"In a number of areas, particularly on the coasts, they have a high risk of price declines in the next two years," says Mark Milner, chief risk officer of PMI.

Red-hot home building, acquisitions, remodeling and refinancing in recent years ... // 50% Remaining