A recent survey of 1,000 consumers by Real Estate Witch found startling misconceptions concerning home prices and the home-buying process. The survey conducted at the end of June found a staggering 73% of Americans think homes are unaffordable at present, with 60% underestimating the actual median home sale price.
The research, conducted by Clever Real Estate, found that only 14% of Americans accurately recognize that the current median home price falls between $400,000 and $499,000. Nearly half believe it's between $200,000 and $399,999. This underestimation exists despite 76% of non-homeowners expressing concerns about rising home prices.
Interest rates also proved to be a puzzling subject. A mere 12% of respondents knew that the current interest rate for a 30-year mortgage is around 7%. Nearly 43% thought it to be higher, with 26% erroneously believing it exceeds 10%, a rate not seen since 1990.
The misunderstandings extend to other aspects of the home-buying process:
Although 31% of non-homeowners claim to be knowledgeable about home buying, 62% wrongly believe a 20% down payment is required. Even more astonishing, 21% think putting down over 20% is necessary.
Bill Mervin of the Bill Mervin Mortgage Team at NJ Lenders Corp. said in an interview in the August edition of National Mortgage Professional Magazine that “such a large portion of our job today is the psychology and dispelling the myths of what’s going on in the marketplace. Misinformation creates a lot of fear and uncertainty for our clientele and partners as well." The NMP article explains the need for mortgage originators to conduct more first-time-homebuyer seminars.
A shocking 85% of Americans, including 83% of homeowners, are unaware of what private mortgage insurance (PMI) is, even though it applies to those who don't put down 20%.
Misconceptions about credit scores and agent commissions were prevalent, with 32% believing a credit score of 700 is required to buy a home (instead of 620) and 62% thinking buyers pay their agent's commission (leading 65% to wrongly assume they can save money by not working with an agent).
Respondents also underestimated the average age of a first-time homebuyer, with 73% believing it's younger than the actual 36.
The abundance of misinformation could be a driving factor behind why 83% of homeowners were surprised by elements of the home-buying process, leading to adjustments in budget (65%) and priorities (63%).
