Real Estate News

New buyers want mortgages they can afford, says report

Published: 20 Jul 2017

Even if it's obvious, a new report shows the sheer importance of finding affordable mortgages, at least for those buyers who are searching for their first home. Chase Home Lending and Google collaborated on a report to assess what prospective buyers are looking for, at least based on their web searches. It outlined the major findings in a "Search for Home Snapshot," saying that, among other things, the number of results related to affordability went up by 34 percent year over year in 2016.

Chase and Google's report
That development also parallels a growth in the sheer number of home seekers looking for the first time, based on data from slightly earlier. The report said that 44 percent of searches in the mortgage category were for debut purchases. 

The source mentioned that both the number of prospective homeowners and the amount of Chase buyers less than 35 years old increased last year, which also matches up with some of the more general statements abut millennial buyers other sources have made.

In the statement, Google Managing Director of Financial Services, Suzie Reider, explained why using web searches as relevant data was important for learning about the new buyer population.

"For many people, the homebuying process is filled with research. For Millennials and first-time homebuyers, we know it's particularly complex and they often turn to Google for answers to their questions about financing, for example," Reider said.

An easier road
If this data influences more affordability-minded changes in the mortgage industry, it might be one of a few different shifts to ease the pressure on younger buyers. Fannie Mae, for example, announced several changes in late April as part of its push to update its products, including no more processing fees for Flash Mortgage-Backed Securities and a longer Project Eligibility Review Service term period. A student loan cash-out refinance feature update also could benefit the borrower class that's still reeling from the accumulated effects of these loans.

This may not directly link to the news from Chase and Google, but if there is an effect from the Fannie Mae policies on mortgage access, younger borrowers could very well be the main demographic that feel it. The buyer's use of the word "affordability," too, may only be a part of the issue, considering the several related purchases that can come with the buying of the house itself and add on to the total cost, creating another reason to search for a cheaper base price.

Overall spend and the homeowner effect
MarketWatch recently commented on the results of a National Bureau of Economic Research study about the level of spending based on 70,000 homes over a period of 12 years. The results alleged that the actual work of renovating a home and moving into it, after the purchase itself, tended to add $5,000 on average to the market price, at least for those properties made to be the main home of the buyer.

What it all could equal is the need for cost-effective mortgage solutions and possibly a response from the lender market acknowledging this, since otherwise the results could simply be a greater tension between demand and supply.

Collating reports from several sources, HousingWire recently claimed that the major lenders might suffer overall after the general downward trend of mortgage revenue. As it stated, Wells Fargo and JP Morgan Chase were both showing lower revenue drives from mortgages this year, and that Citi was leaving mortgage servicing entirely. Even when there were some mild signs of strength, the overall effect seemed to be a decline in profitability from mortgages, potentially incentivizing banks to move away from them.