Tag Archives: repeat buyer

What Are Mortgage Borrowers Thinking?

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photo by Robert Huffstutter

Freud’s Sofa

The Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency (FHFA) have released A Profile of 2013 Mortgage Borrowers: Statistics from the National Survey of Mortgage Originations. While sounding dull and perhaps a bit dated, this document is actually an extraordinary overview of the much discussed but rarely seen mortgage borrower. And while the information is from 2013, it provides a good baseline for the post-financial crisis and post-Dodd Frank world we live in.

Historically, it has been difficult for government and academic researchers to get comprehensive data about mortgage borrowers. The impetus for this report was the Housing and Economic Recover Act of 2008 which requires the FHFA to conduct a monthly mortgage market survey. In the long term, this survey will help policymakers respond to the rapid changes that are so common in our dynamic mortgage market.

The National Survey of Mortgage Originations (NMSO) focuses on

mortgage shopping behavior, mortgage closing experiences, and other information that cannot be obtained from any other source, such as expectations regarding house price appreciation, critical household financial events, and life events such as unemployment, large medical expenses, or divorce. In general, borrowers are not asked to provide information about mortgage terms in the questionnaire since these fields are available [from other sources]. (1)

Here are some of the findings that I found interesting, albeit not always surprising:

  • Mortgage shopping behavior differed significantly by borrower characteristics and by whether the consumer was also shopping for a home at the same time as the mortgage. (14)
  • First-time home buyers differed significantly from repeat home buyers in their mortgage search behavior and repeat borrowers differed significantly in their mortgage search behavior depending on whether they were refinancing or purchasing a home. (14)
  • Slightly more than 40 percent of all respondents reported having a difficult time explaining the difference between a prime and a subprime loan. (16)
  • Overall about one- quarter of borrowers reported that they could not explain amortization or the difference between the interest rate and APR on a loan.(18)
  • Roughly one in five borrowers had to delay their closing date. (26)
  • In general, respondents believe that mortgage lenders treat borrowers well. (35)
  • Fifteen percent of respondents expected to have difficulties in making their mortgage payments in the next couple of years. (44)

There are a lot more interesting nuggets about the subjective views of borrowers in the report. I hope that later reports offer more analysis that ties this information into other objective sources of data about borrowers and their mortgages. How well do they know themselves and how good are they at predicting their ability to maintain their mortgages over the long-term?

Home Buyers & Home Sellers

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Jkirriemuir

The National Association of Realtors has issued its 2015 Profile of Home Buyers and Sellers (highlights only at this link). The profile derives from NAR’s annual survey of recent home buyers and sellers. NAR found that

Demographics continue to shift as the share of first-time home buyers dropped further from last year’s report to 32 percent of the market. This is second only to the lowest share reported in 1987 of 30 percent. Last year’s report had a share of first-time buyers of 33 percent. First-time home buyers are traditionally more likely to be single male or female home buyers and traditionally have lower incomes. As the share of repeat buyers continues to rise, the number of married couples increases and the income of home buyers purchasing homes is higher. Married couples have double the buying power of single home buyers in the market and may be better able to meet the price increases of the housing market. (5)

This adds to the findings of a variety of earlier studies that have described long-term demographic trends that will affect the housing market in very big ways.

I was particularly intrigued by one finding about sellers,

Increased prices are also impacting sellers. Tenure in the home had risen to a peak of 10 years, but in this year’s report it has eased back to nine years. Historically, tenure in the home has been six to seven years. Sellers may now have the equity and buyer demand to sell their home after stalling or delaying their home sale. (5)

This is a dramatic change and reflects the the long-term effects of the Great Recession — just as people delayed buying a new car after the financial crisis, they also delayed purchasing a new home. It’s just that they delay takes longer to see.

The report also has a series of highlights about houses, brokers and mortgages that are worth a looksee.