MReport September 2020

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46 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Most Buyers Will Exceed Budget for 'Perfect Home' Achieving the American Dream can require taking out a bigger loan than first anticipated. I t looks as if lenders may be in luck, as more and more homebuyers will most likely be needing to take out larger mortgages than they had first an- ticipated. According to a recent report from real estate experts at Lending Tree, most American homebuyers (nearly two-thirds) are still willing to ante up the asking price on a new abode, even though it exceeds their cur- rent budget. The exact percentage was 64%, which means that more than 6 out of every 10 homebuy- ers are willing to go over budget in order to attain the house of their dreams. Also making up a vast majority of American homebuyers today: those who report finding the entire home buying process highly stress- ful, especially during these unprecedented times. Especially stressed out by this home buying jour- ney are millennials, who answered the survey not holding back about their emotional states while navigating the steps of a home sale. Specific statistics from the survey showed that more than 3 out of every 4 millennials (those respondents aged 24 to 39) admitted that they had overextended themselves past their set budgets in order to obtain their desired house on the market. That is a whopping 64%. Among the males surveyed, those who admitted to making the same compromise and exceeding budgetary constraints was ac- counted for 74%. Tendayi Kapfidze, LendingTree's Chief Economist, issued a warn- ing to homebuyers in light of these current findings: "I urge homebuyers to be very cautious about going over budget. Many people underestimate the mainte- nance costs of owning a home." Kapfidze added: "If you are stretched financially and underin- vest in maintenance, it can dimin- ish the value of your home." A highlight was also placed on how certain groups are particularly overwhelmed and placed under pressure when seeking to secure their mortgages. Specifically mentioned were Black and Hispanic homebuyers, who reported being nearly two times as likely (16% and 18%, respectively) as their white counterparts (who represented 9%) to admit that the application process for applying for a mortgage was the absolute most stressful portion of the entire home buying journey. Places Where Research Shows Biggest Decline in Affordability Nationally, house-buying power continues to outpace nominal house price appreciation, researchers say. A ffordable homeownership opportunities continue to be an elusive object in the housing market, according to First American Financial Corp.'s newly-released First American Real House Price Index (RHPI) for June. The report measures the price changes of single-family properties throughout the nation, adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state, and metropolitan area levels. According to the RHPI: » Real house prices decreased by 0.2% between May and June and declined by 4.8% year over year. » Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 1.1% between May and June and increased 13.7% year over year. » Median household income inched up by 0.2% from May to June; since January 2000, this measurement rose by 64%. » Real house prices are 22.4% less expensive than in January 2000. » While unadjusted house prices are now 13.5% above the hous- ing boom peak in 2006, real house-buying power-adjusted house prices remain 45% below their 2006 housing boom peak. Mark Fleming, Chief Economist at First American, noted that the housing market "has thus far managed an impressive V-shaped recovery" despite the chaos that the COVID-19 pan- demic had on the rest of the economy, although he observed that "growing demand against dwindling supply has worsened the supply and demand imbalance, which will continue to drive nominal house price appreciation." "Nationally, house-buying power, how much home one can afford to buy given their income and the prevailing 30-year, fixed- rate mortgage, continues to outpace nominal house price appre- ciation, resulting in a 4.8% improvement in affordability relative to one year ago," Fleming continued. "Yet, all real estate is local and affordability dynamics can vary greatly at the market level … In June, the RHPI increased in 35 of the 44 markets we track year over year, meaning affordability declined in each." Vermont led the states with greatest year-over-year RPHI at 10.6%, followed by New Mexico at 10.3% and Montana at 9.4%, while Louisiana recorded the greatest decrease with a 10.1% drop. Among the nation's major metro areas, New York City had the greatest year-over-year RPHI increase at 29.3% and Las Vegas had the greatest decrease with a 25.6% plummet. "I urge homebuyers to be very cautious about going over budget. Many people underestimate the maintenance costs of owning a home." —Tendayi Kapfidze, Chief Economist, LendingTree

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