Home prices continue escalating in a generally tight U.S. market, which is making half of Americans believe they can’t afford to buy, according to a new report from online bank Laurel Road. However, the report suggests that this fear is largely fueled by a “knowledge gap,” particularly between men and women.
The gap refers to the lack of understanding when it comes to financing options. Mostly, this centers on what many buyers find most intimidating about homebuying: the 20 percent down payment.
“The down payment is often considered one of the biggest barriers to affordability, but nearly half of Americans are currently unfamiliar with alternative down payment options,” the report states. Similarly, the National Association of Realtors found that, in 2017, the median down payment for first-time buyers was 6 percent.”
That made 2017 the third straight year that was true. Still, more than half the respondents of Laurel Road's survey of college-educated buyers said they plan to put 20 percent down on a home. Another 42 percent said they would have to tap other means of financial assistance.
Gender seems to be playing a key role in finding those alternatives. According to the report, while about 25 percent of men said they were unfamiliar with alternatives, half of women said the same thing.
“This lack of knowledge around alternative options potentially contributes to the fact that more than one-third of respondents—and 46 percent of millennials—do not feel confident that they could currently afford a 20 percent down payment,” the report found. That feeling is especially prevalent among those with student loan debt.
Laurel Road found that a knowledge gap surrounds current interest rates too. The survey revealed that Americans think mortgage interest rates in the U.S. will reach 6 percent by the end of the year, even though the Mortgage Bankers Association expects interest to top out at 4.6 percent. Almost three-quarters of millennials are concerned over higher interest rates, while a third of baby boomers are, according to the report.
“Purchasing a home is a life-changing decision, yet despite the range of resources, people often aren’t aware of the personalized options available to fit their specific situation,” said Alyssa Schaefer, CMO of Laurel Road. “By arming future homebuyers with the knowledge and support needed to make an informed and confident decision, we are committed to empowering our customers during the homebuying process. Ultimately, through our research and evolving product set, our mission is to meet our consumers where they need us most, by providing an exceptional experience across each major financial milestone.”