Homebuying season is underway — and demand is strong. Perhaps encouraged by lower mortgage interest rates, a large number of people who would like to buy a home in the coming year are hopping off the fence and shopping around. Nearly half of these prospective buyers are actively searching for their dream home, according to research from the economics team at the National Association of Home Builders.
To get a deeper understanding of homebuyers’ perceptions of today’s housing market, and what exactly about the homebuying process causes them stress, LendingTree commissioned a survey of first-time and repeat buyers. The results are highlighted below.
Key findings
6 in 10 homebuyers think now is a good time to purchase a home.
And the majority of nearly every category agree. Nearly two-thirds (65%) of homebuyers with credit card debt and almost 62% of buyers with student loan debt believe it’s a good time to buy a home. Just over half (55%) of homebuyers without any debt agree.
Current homeowners more likely than renters to say it’s a good time to buy.
Just under two-thirds (64%) of those who have previously purchased a home think now is a good time to buy a home, versus 55% of those who have never bought a house.
Additionally, 63% of homebuyers who are married or in a domestic partnership believe that it’s a good time to buy, while only half of divorced buyers agree.
4 in 10 buyers think finding a home within their budget is the most stressful part of the process.
Another 22% say the most stressful part of the homebuying process is finding a home that fits their needs. Besides home affordability, buyers with non-mortgage debt are more likely to say actually getting a mortgage is the most stressful part of homebuying.
A majority of millennial buyers (64%) think mortgage rates are too high.
Older generations agree, but to a lesser extent. Just over half (54%) of Gen Xers, nearly 52% of baby boomers and 40% of the Silent generation think rates are too high to buy.
Mortgage rates are historically on the lower end, however. In fact, just before the Great Recession in summer 2007, the average 30-year fixed-rate mortgage peaked at 6.73%. As of late May 2019, the average rate was 3.99%.
Homebuyers with non-mortgage debt are also more likely to be unhappy with current mortgage rates compared with consumers who have a mortgage.
Other takeaways
- The higher a buyer’s credit score, the more positive outlook they have about buying a home. More than two-thirds (69%) of homebuyers with a credit score of 740 or higher think now is the right time to buy, compared with just 52% of buyers with a score of 579 or lower.
- Men are more likely to be optimistic about the housing market than women. More than 6 in 10 men (63%) say it’s a good time to buy, compared with 57% of women.
- Besides staying within their budget, boomers are more likely to say finding a home that fits their needs is the most stressful part about buying a home (28%), while millennials are more likely to say getting a mortgage (23%).
- Millennials are also more likely to have argued with their partner over the homebuying process (23%) when compared with older generations. Of buyers with credit card debt, about 1 in 5 report that the homebuying process has caused arguments with their partner, versus just 8% of debt-free homebuyers.
- On a regional level, Midwesterners are most likely to have positive views about the housing market, while residents of Western states feel less confident, which might be attributed to the characteristically higher home prices out West. Nearly two-thirds (65%) of homebuyers in the Midwest think it’s a good time to buy a home, while just over half (54%) of buyers in the West agree. A majority of homebuyers in the Northeast (61%) and South (60%) also think it’s a good time to buy a home.
Helpful homebuying tips
It’s possible you’ll experience some sort of stress during the homebuying process, but there are ways to minimize it. Consider these tips as you prepare to enter the housing market.
Be clear on your budget. You don’t have to be in the 40% of buyers who worry about finding a home in their budget if you know early on how much house you can actually afford. Get a mortgage preapproval from a few lenders before you start house hunting. A preapproval gives you the estimated loan amount and interest rate you might qualify for, based on a review of your financial profile.
Properly manage your existing debt. Whether it’s credit cards, student loans or some other form of debt, make sure you’re paying down your balances and maintaining on-time payments. Mortgage lenders want to know how you’re handling your existing debt and how much of your income is dedicated to repaying that debt every month. If a huge chunk of your earnings go toward repaying debt, you may have trouble qualifying for a mortgage. Keep your debt-to-income ratio — the percentage of your gross monthly income that is used to make debt payments — at or below 43%. This ratio includes your estimated mortgage payment.
Save up to cover your borrowing costs. Taking out a mortgage isn’t a free transaction. You’ll have to come up with down payment funds as well as closing costs. Depending on your credit score, you may qualify for a mortgage with as little as 3% down, but closing costs could run you an additional 2-5% of your loan amount. Save as much as you can to have a sufficient amount of money to close on your home — and then some.
If you still have some concerns around purchasing a home, review these eight homebuyer questionsand answers.
Methodology
For this survey, LendingTree commissioned experience management firm Qualtrics to survey 2,095 Americans aged 22 and older who are considering a home purchase within the next two years. The survey was conducted online March 11-15, 2019, and the margin of error is +/-2.4%. One caveat: This survey was fielded just prior to the recent trend of falling mortgage rates.
Generations are defined by the following ages:
- Millennials: ages 22-37
- Gen Xers: ages 38-53
- Baby boomers: ages 54-72
- Silent generation: ages 73+
