Credit proves a hurdle for potential homebuyers
Spring has already proven to be a success for the housing industry. In its latest report, CoreLogic noted that there are a number of factors that could help strengthen the housing sector even more, but homebuyers are still facing major obstacles standing between themselves and homeownership.
Right now, sellers are facing the challenge of owning enough equity in their existing home to have a strong enough downpayment on a home in a competitive sellers’ market. Not only that, they need to have a qualifying credit profile in a tight lending industry.
Luckily, many of those markets that were hit the hardest have had strong price improvements in 2012, removing some of the insufficient equity constraint. With more equity in their hands, owners are putting their homes up for sale and contributing to a tight housing inventory, CoreLogic writes, then transitioning into the buyer role once their home has sold.
Not only that, increasing equity is reviving trade-up buyer demand, creating a healthy housing cycle.
Coinciding with this newfound equity is increased investor activity, which is expecting to continue driving demand throughout the year.
It is anticipated that the first-time homebuyer will also make a stronger appearance in the near future. Today’s household formation has many potential first-time buyers running to rentals, but CoreLogic notes that is part of the cycle.
The report’s author, Mark Fleming, writes, "As new renter-households are formed, rental prices are bid up, making the prospect of owning more attractive to existing renters."
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Fleming notes that the expectation this spring is that more renters will take advantage of historically low interest rates and low home prices and become first-time homebuyers.
While the economy is getting back on its feet, slowly but surely, the housing sector is establishing itself as a substantial contributor to this improvement. With equity becoming more sufficient, creditworthiness seems to be one of the only obstacles for potential homebuyers.