Half of Would-Be Home Buyers Face Barriers

Mike Sorohan msorohan@mba.org

April 16, 2019

The National Foundation for Credit Counseling, Washington, D.C., said its annual Consumer Financial Literacy Survey found half of Americans who tried to purchase a home faced barriers ranging from rising home prices, saving for a down payment, limited credit history and household debt.

The survey, conducted in March among more than 2,000 U.S. adults, said many Americans face increasing barriers to homeownership despite the good news about the economy. It said younger Americans overwhelmingly report challenges related to becoming homeowners, with 90% of male millennials and 76% of female millennials who have tried to purchase a home reporting barriers. Geographically, more aspiring homebuyers in the west (54%) report difficulties buying a home when compared to those in the northeast (44%).

The report was released in conjunction with National Consumer Financial Literacy Month. "Homeownership is the underpinning of a stable economy and should be accessible for everyone with the means and ability to achieve that dream," said NFCC President and CEO Rebecca Steele.

The survey said nearly one in five respondents (18%) identified rising home prices as the biggest barrier. Among those who say they faced barriers, all indicated this issue as a problem. Far more homebuyers in the West said this is an issue than those living in other regions of the country.

The survey reported lack of funding for the down payment and/or closing costs is also a complicating factor for some who want to purchase a home (14%). African American (66%) and Hispanic (54%) homebuyers are more likely to encounter obstacles in the home buying process than those identifying as white (44%).

A poor credit history ranked thirsd (11%), an issue also faced by a portion of homebuyers with a limited credit history (10%). Hispanics (17%) and African Americans (13%) fare worse than white home buyers (8%) on thin credit files.

The survey said debt issues are shared by homeowners and renters alike but can sometimes get in the way of those struggling to move from renting to owning. A majority of U.S. adults (60%) have had credit card debt in the past 12 months, and a portion indicates their household carries debt across billing cycles. Nearly half of households that carry credit card debt from month to month (51%) also report experiencing challenges in the home buying process. The portion is even greater for those reporting difficulties paying down their debt (58%). Also, nearly one-fourth of aspiring homebuyers with an annual household income of $50,000-$75,000 report existing debt as a barrier to purchasing a home (23%).

On the positive side, the survey said two in five U.S. adults (42%)--a proportion that has held roughly steady since 2007--said they have a budget and keep close track of how much they spend on such things as food, housing, and entertainment. Equally encouraging, NFCC said, is the proportion who say they are saving more (26%) compared to last year greatly exceeds those who are saving less (15%). Credit card debt, which has reached near record levels for average interest rates, is no worse an issue than last year as nearly 2 in 5 (37%) indicate their household carries such debt from month to month.

NFCC is pursuing partnerships with lenders, fintechs and community-based organizations to help increase consumer awareness of counseling programs like Envisioning Homeownership.

In 2018 the Mortgage Bankers Association, HomeFree-USA, Wells Fargo and Freddie Mac launched the Center for Financial Advancement, a partnership focusing on career opportunities and financial education at Historically Black Colleges and Universities. It is designed to promote financial literacy, homeownership and expand diversity and inclusion in the mortgage industry, with the goal of preparing African-Americans both for homeownership and for an empowered life with financial freedom.
Through this program, the Center will elevate money management skills, teach students about credit and homeownership plus position many for a financially rewarding career in the mortgage industry. Fisk University in Nashville, Tenn., is the first HBCU to participate in the program. More information can be found at https://homefreeusa.org/cfafisk.

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