Some homebuyers may be affected by buyer's remorse, according to a new survey by LendEDU. During the pandemic, mortgage and refinancing rates rose to an all-time low. Purchases increased 22% and refinances increased 84% compared to the same period last year. To review these trends, LendEDU surveyed 1,000 homeowners with an outstanding mortgage and found that 55% of new homeowners regret taking out a mortgage during the pandemic.
Of existing homeowners with an outstanding mortgage, 6% took out a mortgage during the pandemic, and 72% of new homeowners said they chose to buy their home because of the low interest rates caused by the pandemic. Of the 55% who express remorse, 30% wish they had waited to buy a home for financial reasons, and another 7% of new homeowners said they were unprepared for home ownership.
It's not surprising that the pandemic has spiked new home ownership rates. After the start of the pandemic and the subsequent economic turmoil, mortgage rates hit an all-time low. At the same time, the outbreak had a significant impact on city centers like Los Angeles and New York City. Offices have been closed and companies adopted guidelines for working from home. The combination catalyzed Demand for suburban homes in "safer" sprawling markets outside the city center
In addition, real estate prices have continued to rise Increase during the pandemic. The National Association of Realtors released a Q2 report on the residential real estate market. The report found that 96% of US markets reported increased house prices. The price trend coupled with lower mortgage rates may also have encouraged new homebuyers to enter the market and contributed to the increase in sales volume.
New homebuyers weren't the only mortgage demographic. Most of the new mortgage volume during the pandemic came from existing homeowners refinancing mortgages. According to the survey, 26% of homeowners refinanced their home loan during the pandemic. Most homeowners refinance to get a cheaper interest rate. Interest rates were actually falling so quickly that some new homeowners refinanced almost immediately to take advantage of the lower interest rate environment.
It wasn't a fairy tale for everyone, however. The survey also found that 54% of homeowners have seen negative credit marks for something like a missed payment, even if they chose to forbear. In addition, 41% of homeowners struggled to make their mortgage payments during the pandemic. Job loss or financial problems were the main reasons homeowners struggled to make a mortgage payment. New homeowners see the greatest challenge in keeping up with mortgage payments. 23% of this population group report job losses.
Fortunately, mortgage lenders have remained flexible during the pandemic. The survey found that 18% of homeowners received an indulgence and 25% agreed to a reduced monthly payment. However, in many ways, these forbearance policies have resulted in a false negative credit report. While this has become a problem for many, 60% of homeowners were able to fix the bug and another 10% worked to fix the bug.
