According to Bank of America's annual Homebuyer Insights Report, 72% of prospective homebuyers are concerned that rent increases could affect their current and long-term finances. Housing inventory remains low and housing prices remain high.
Matt Vernon, head of consumer lending at Bank of America, joins Wealth! We offer insight on how to make home buying a little easier.
Vernon emphasizes the importance of maintaining a good credit score. “First and foremost, be aware of your credit score and ultimately prioritize and take actions to improve it. Having a good credit score will help you get approved for a loan from a financial institution. It's not just good for the lender, it can also be beneficial from an interest rate perspective, which is very important in today's interest rate environment. ”
For more expert insights and the latest market trends, click here to watch the full episode of Wealth.
This post was written by Nicholas Jacobino
video transcript
As a haven, the situation continues to be difficult, with inflation rising by 4/10 percent in April.
Rent costs, in particular, remain a major issue.
And this is actually consistent with research from New Bank of America, which shows that many prospective homebuyers are concerned about the long-term effects of renting, and that rent increases are It has been revealed that 72% of people are concerned about the potential impact on their finances.
moreover.
Matt Vernon, head of consumer finance at Bank of America, is here.
I'm glad to be with you.
Let's take a closer look at it. Now that we're actually getting some of the data from this survey, what kind of sentiment are you seeing among renters right now?
Well, interestingly, as you've already set out, most renters in the survey ultimately believe that renting may be a good decision in the short term, but before, before, I responded that renting might be a good decision based on the current environment that reporter was talking about. They also believe they are missing out on the long-term economic appreciation that homeownership ultimately brings.
So they're making short-term decisions.
Well, you know they're making potentially long-term sacrifices.
And in fact, 80% of those surveyed who are currently renting – sorry, 76% – expect to buy within five years.
Thanks for throwing that out there.
And as I look at the statistics, it comes to mind that there are potentially many renters out there who aren't actually paying market rates. He's paying a different fee than the $10 that the landlord is willing to give them so the landlord doesn't have to do another report at the end of the day.
So, uh, the difference or delta between these two prices, the amount that's actually being paid and the amount that's being reported, where does that end up starting to show up? Well, how does that start to show up in some of the relief in shelter costs that the economists that we're talking about on the show continue to do? One of the trickiest and most troublesome parts of the inflation situation.
Yeah.
Hey, it's all supply and demand in so many ways, whether you're talking about rental inventory or housing inventory.
And that gap will still exist until that inventory increases and eventually supply and demand become more balanced.
I think there are some early signs, but a previous reporter said the numbers are starting to rise even more. Given the number of plans available to buyers, how many of them are currently waiting for a wave of rate cuts, based on our research and what we're hearing from potential homebuyers?
Yeah, I think that's on everyone's mind, and it's both existing homeowners, and that percentage could be 3-2, even 2-4.
And the prospective homeowners looking at the seven-handle rate you talked about say the mortgage market is expected to be close to $1 trillion this year from a purchase standpoint.
And our research shows that people still believe in the dream of homeownership and ultimately understand that renting may be short-term, but that the economic achievement of owning a home means that the It turns out that the sense of permanence is still alive and well among today's consumers. , people who are considering buying a home need to prepare themselves and prepare themselves, um, to make sure that they can jump on the opportunity when it seems right. , what can consumers do?
Yes, Brad, that's a great question.
First of all, there are four or five main things. Be aware of your credit score and ultimately prioritize and do things to improve it.
Having a good credit score doesn't just help you get approved for a loan from a lender.
You also benefit from an interest rate perspective, which is very important in the current interest rate environment.
The second one was safe and went up on the screen.
So it's really important to create a budget for yourself and ultimately save for that down payment and any unexpected expenses that come with homeownership. Debt is a big problem.
Lenders look at your debt to income ratio.
So you minimize your debt and end up taking on more debt unless absolutely necessary.
Then, if possible, pay off that debt as part of your savings plan and prepare your finances.
It's really about having a realistic understanding of a home that you can comfortably buy, not a ready-to-buy mansion, but a home that you can comfortably buy and most importantly, ready. That's it.
You mentioned jumping into a competitive environment.
It is very important for prospective buyers to obtain pre-approval from a financial institution such as Bank of America. That way, buyers will know when they make an offer on their dream home or the right community with the right schools. They are ready, pre-approved and can accept your offer.
So, Matt, my home buying strategy is similar to going to Top Golf.
I'm just swinging towards the back net every time uh so hopefully I can listen to your advice a little bit more and put something a little bit more reasonable for a lot of homebuyers here. think.
Finally, the affordability of their homes, or the home affordability equation, also seems to be factored into a lot of who they choose as president.
But even after the election, and Al looks like he's going to turn that around, will people's home buying sentiment change depending on who's in the White House?
No, I don't think so.
I've been through many cycles with technological changes in ideas, whether it's Republican or Democratic, but at the end of the day, homeowners are going to think very much the same way, and it all comes down to, Their effective image will be based on what they want to achieve economically.
And the environment we're in is more important than the politics of who's in the White House.
Matt, you have really solid insight and background. Matt Vernon is head of consumer finance at Bank of America.
This time, thank you very much.
Okay.
Thank you, Brad.
