Survey: Knowledge Gap Contributing To Housing Market And Affordability Concerns, Cautiousness

National survey by Laurel Road reveals current housing and financial environment impacting purchasing decisions, despite institutional indicators

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Laurel Road

Jun 11, 2018, 09:00 ET

NEW YORK, June 11, 2018 /PRNewswire/ -- Ten years after the 2008 housing crisis, Americans eye the housing market with caution, as more than half (53%) of Americans who have or plan to buy a home admit they're concerned about their ability to afford a home in the current market, according to a recent study of college-educated adults. The findings, release today by national online lender and FDIC-insured bank Laurel Road, also reveal that Americans on average believe a similar housing crash will occur in the next five years, and nearly one-fifth of respondents anticipate a crash in less than one year.

The survey examines how misconceptions and unclear options are inflating anxieties when it comes to housing market decisions. For example, the down payment is often considered one of the biggest barriers to affordability, but nearly half (46%) of Americans are currently unfamiliar with alternative down payment options. Similarly, the National Association of REALTORS® found that in 2017 that the median down payment for first-time buyers was 6% of total home price for three straight years, but nearly three in five respondents (58%) plan to put down a traditional 20% down payment, while 42% feel they would need to tap into other means, such as mortgage insurance (14%). The survey found that women in particular are potentially underestimating affordability, as they are significantly less likely than men (49% vs. 59%) to be familiar with the alternatives.

This lack of knowledge around alternative options potentially contributes to the fact that more than one-third (35%) of respondents – and 46% of millennials – do not feel confident that they could currently afford a 20% down payment. Women (45%) feel particularly less confident than men (24%), while more than two-fifths (42%) of student loan carriers do not feel confident.

A knowledge gap also surrounds current interest rates. The survey revealed that Americans think mortgage interest rates in the U.S. will reach 6%, on average, by the end of the year, while the Mortgage Bankers Association expects a more modest 4.6%. Interestingly, millennials (70%) are the most concerned about the impact of rising rates, compared to 60% of Gen Xers and 35% of boomers. Compared to boomers (78%), millennials (53%) are less likely to think it's best that others pull the trigger and buy now, suggesting those that are more likely to be buying their first home are apprehensive about purchasing decisions.

In sum, these findings suggest consumers are concerned and cautious about housing decisions in the current market, despite the fact that interest rates are historically low. In fact, the majority of people (74%) who have bought, or plan to buy, a home would only accept an interest rate of less than 6% before they decided not to move forward with a purchase. However, a lack of historical context may contribute to this sentiment. Americans believe the highest U.S. mortgage rates have ever reached was 12.25%, on average. In reality, rates have exceeded 18% – a fact only 8% of Americans know.

"Purchasing a home is a life-changing decision, yet despite the range of resources, people often aren't aware of the personalized options available to fit their specific situation," said Alyssa Schaefer, Chief Marketing Officer of Laurel Road. "By arming future homebuyers with the knowledge and support needed to make an informed and confident decision, we are committed to empowering our customers during the homebuying process. Ultimately, through our research and evolving product set, our mission is to meet our consumers where they need us most, by providing an exceptional experience across each major financial milestone."

Additional findings include:

Setting timelines: Americans estimate they will buy a home in the next six years, on average. First-time homebuyers plan to purchase a home in just two years – at age 36, on average. Concern may even play a role in buying patterns, as 62% of those who are concerned about affordability are currently looking or plan to buy in less than five years, compared to 33% of those who aren't concerned.
Planning ahead: Among Americans who have ever bought, or plan to buy, a home, 85% have plans for their savings if they refinanced their mortgage.

48% would put it into savings
41% would pay off debt, such as credit cards or student loans

(50% of millennials vs. 45% of Gen X and 32% of boomers)

27% would remodel their home

Spurring action: Among current and prospective homeowners, nearly one in three (32%) are more likely to refinance their home, specifically because of the potential for a future rate hike.

About the Survey
The Laurel Road survey was conducted by Wakefield Research (www.wakefieldresearch.com) among 1,000 nationally representative U.S. college-educated adults, with 50% of respondents who have a graduate degree, between April 11 and April 18, 2018, using an email invitation and an online survey.

Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 3.1 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.

About Laurel Road
Laurel Road is a national online lending company and FDIC-insured bank, offering online student loan refinancing, personal lending and mortgage products as well as consumer and commercial banking services. Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with graduate and undergraduate degrees to refinance and consolidate more than $3 billion in federal and private school loans, and with our low rates borrowers have reduced their monthly payments and on average saved tens of thousands of dollars. For more information on potential savings, see laurelroad.com/student, in addition to laurelroad.com/mortgage.

Laurel Road Bank is a Connecticut banking corporation offering lending products in all 50 U.S. states, Washington, D.C. and Puerto Rico. The mortgage product is not offered in Puerto Rico. Laurel Road Bank is an Equal Housing Lender, Member FDIC. NMLS ID # 402942.

Media Contact:
Kwittken PR for Laurel Road
212-352-4651
[email protected]

SOURCE Laurel Road