Friday, October 8, 2010

"The New Normal" - Part IV: 30% of Americans Can't Qualify For A Mortgage Due to Low Credit Scores

...And of those who can qualify, 50% don't have credit scores high enough to receive the current,  historically-low 30 year fixed rate of 4.22%.

Zillow looked at 25,000 prospective buyers from Sept. 1 - 15th; even when the low credit score applicants had a 15-25% downpayment, they received zero offers. Read the WSJ, the Zillow blog, and see Realty Check.

In Charlottesville / Albemarle,  there are many other issues besides credit scores that are keeping buyers out of the market.  
  • The large number of folks who come here for 2-4 years can't buy because they'll lose transaction costs plus however more home prices decline; 
  • Lots of potential  "move-up"  buyers would have to sign contingent contracts if they wanted to buy again--but if they purchased in the past 6 years, their asking price for current home will be deemed too high for today's buyer (a newly built home might cost less at this point....);  
  • The $500k - $1M market is gasping; 
  • The $$$ properties are languishing; 
  • Lots of folks who are selling are trying to leave the City for a new job, retiring, or trying to unload an albatross--that is, they're not buying again.  
  • Toss in a City rate of 23% poverty, County at 10%....
  • And then there's the pricing....
This isn't fancy economics.  It's not "lack of confidence" in the economy that's keeping inventory so high in this area.  It's lack of qualified buyers.  

"The New Normal" is a multi-part series examining local and national housing issues.  See posts here.


Sugar Snap Consignment said...

I'm renting a 3 bedroom in the locust grove neighborhood for $1025/mo. Recently saw a foreclosure that would cost me $700 a month to own. Twice the size of my rental, same area. But you have to prequalify for a mortgage before they will even show it. What does that mean? No more than 36% of my income (mid 40k) can go toward bills/living expenses. Do you know anyone these days who fits that description? The middle class is screwed.

craigger said...

sugar snap, you may be able to qualify for FHA. Where is the house?