If you're house hunting, it can feel like the market is moving quickly and everyone is buying. An index of homes under contract, known as pending home sales, jumped a higher-than-expected 1.5% in June, according to the National Association of Realtors.
But according to a recent Experian survey, fewer people are planning on buying: 27% of consumers are not planning to purchase a home in the next 5-10 years, an increase of 8% from 2016. The survey findings also show some consumers have frustrations with the home buying process, especially first-time homebuyers and those who don't have high incomes. We dive into the survey findings here:
So who's waiting to buy?
Younger consumers and those in the West are most likely to wait to purchase a home. In fact, 34% of consumers ages 18-34 say they will opt-out of homeownership. Regionally, consumers in the Northeast had the biggest jump among those opting out of buying a home: 26% in 2017 vs. 13% in 2016. With prices soaring in California, Seattle, and Portland, 32% of consumers in the West are deciding not to buy a home this year, an increase of 8% from last year.
One of the reasons may be that many consumers surveyed (54%) say homes are less affordable. Again, it was higher among those respondents from the West, with 62% agreeing the housing market is more expensive today while 57% are from the South and 53% in the Northeast.
Additional reasons cited for not purchasing a home include wanting more flexibility to relocate (37%) and almost 30% do not want to carry so much debt. One-third of millennial survey respondents want to invest in something else.
Contrary to conventional wisdom that limited supply is restraining home purchases, 64% of people surveyed say there are enough houses on the market to choose from.
Credit concerns with the loan process
While a majority of consumers (71%) understand the importance of credit when buying a home, 63% agree that their credit score, in particular, has impacted or will impact their home-buying experience. Among those who already purchased a home in the past year, 65% agree that their credit score affects the interest rate to refinance their home.
However, 43% of survey respondents say they were denied a home loan with more than half attributing the denial to a poor or limited credit history. In fact, 56% overall say they are working to improve their credit to qualify for a better home loan rate. Additionally, 54% have delayed purchasing a home to improve their credit to get a better interest rate.
Among those who are trying to better their credit, some of the steps they are taking include paying off debt and paying bills on time.
When you start the home buying process, one of the most important steps you can take to put yourself in the best position is to check your credit score and credit report. You should make sure you have a solid FICO® Score* (lenders can use different scores when assessing your credit worthiness, but FICO® is used by most lenders) and review the details of your credit report to make sure everything looks correct. In addition, check your financial profile for the following:
- That you are current on all of your accounts such as credit cards and that your credit utilization is not too high.
- While income is not part of your credit report or a factor in your credit scores, many lenders will ask for income information so know your debt-to-income ratio.
- It's always helpful to have a diverse mix of accounts such as an auto loan, credit cards, etc., to show that you can manage a variety of credit obligations.
By preparing ahead of time and understanding your own credit as well as the market you're buying, you can help set yourself up for more success when looking to buy a house.
Survey Methodology: The data points referenced in this report come from a survey commissioned by ConsumerInfo.com, Inc., an Experian company, produced by Edelman Intelligence and conducted as an online survey of n=1000 adults nationwide that took place June 21-27, 2017.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on August 1, 2017, and has been updated.
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.