Price, Down Payment Keep Many From Home Ownership

Despite a strong U.S. economy, homeownership is beyond reach of many households because of rising housing costs, other debts, poor credit or the lack of savings for a down payment.

Young people and minorities are most likely to report obstacles, according to the survey released Monday by the National Foundation for Credit Counseling.

The Washington, D.C.-based foundation commissioned The Harris Poll, which surveyed 2,086 U.S. adults ages 18 and older March 8-13.

The online survey found half of U.S. adults who have pursued home ownership say they have faced barriers. Among millennials (ages 23-38) who have tried to purchase a home, 90% of men and 76% of women reported barriers.

While only 44% of whites shopping for a home reported obstacles, 66% of African Americans and 54% of Hispanic homebuyers said they encountered them.

“Homeownership is the underpinning of a stable economy and should be accessible for everyone with the means and ability to achieve that dream,” NFCC President/CEO Rebecca Steele said.

The most common barrier was price. It was cited by 18% of participants who have tried to purchase a home, and was cited by all who reported obstacles.

Among home shoppers in the West, 54% encountered difficulties. Westerners were also far more likely to cite price is an issue than those living in other regions of the country. The median home price in the West was $382,400 in February, the highest among the four regions reported by the National Association of Realtors. The lowest was $189,900 in the Midwest.

Other roadblocks were:

• 14% cited lack of cash for a down payment and closing costs;
• 11% cited a poor credit history;
• and 10% cited a limited credit history.

Hispanics (17%) and African Americans (13%) fare worse than white homebuyers (8%) when it comes to reported barriers relating to thin credit files.

“The survey data clearly demonstrate the barriers many aspiring home owners face,” said Matt Ribe, the foundation’s general counsel. “For many, their perception of those obstacles can become its own barrier to homeownership.”

But two trends augur well for homebuyers: Price increases are moderating, and interest rates have fallen.

The National Association of Realtors reported that the median price of existing homes in February was $251,400, up 3.6% from a year ago.  That compares with full-year price increases of 5.1% in 2018 and 5.6% in 2017.

Freddie Mac reported that 30-year fixed-rate mortgages carried an average 4.08% interest rate in the week ending April 4, down from 4.40% a year ago. In the week ending March 28, the rate dropped 22 basis points, the biggest one-week drop in a decade.

The foundation’s study also found that while debt issues are common among both homeowners and renters, debts can be another hurdle for those struggling to move from renting to owning.

About half of households that carry credit card debt from month to month also report experiencing challenges in the home-buying process. The portion is even greater for those reporting difficulties paying down their debt (58%).

Also, 23% of aspiring homebuyers with an annual household income of $50,000-$75,000 report existing debt as a barrier to purchasing a home.