These days, many consumers may be getting their finances back together and improving their credit standings, but that has likely had little effect on their ability to qualify for a mortgage, which can lead to higher costs for rent.
In response to high rates of consumers choosing to rent homes rather than buy during and in the wake of the recent economic downturn, the cost of doing the former has risen significantly in the last few years, according to a report from Reuters. In fact, rental prices have risen so high that in many parts of the country, it would likely be more affordable for people to simply buy their own homes and pay mortgages.
Unfortunately for those feeling the housing cost pinch, mortgage lenders’ currently credit qualification standards are simply too high for them to meet, meaning they have to stick with a more expensive living situation, the report said. In the past, this was largely a problem that effected those with lower incomes, but now the middle class is dealing with it as well.
“We have falling incomes, rising rents and nothing but substantial upward pressure on those rents,” Chris Herbert, director of Harvard University’s Joint Center for Housing Studies, told the news agency. “And nothing in the cards suggests it will turn around anytime soon.”
Data from the trade magazine Inside Mortgage Finance show that lending for new home loans hit a low not seen in 12 years in 2011, slumping to just $404 billion worth of new financing, the report said. That’s down nearly $1 trillion from the levels seen in 2006, indicating that credit has been tight for some time now.
Further, new research from Morgan Stanley shows that the average credit score for a consumer getting a mortgage backed by government-sponsored enterprises like Fannie Mae and Freddie Mac is currently at 762, the report said. This is problematic because 65 percent of Americans have ratings of 750 or lower.
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Many consumers have also seen the required value of their down payments on a mortgage they can qualify for spike as well, making it more difficult to make the first step toward homeownership. This is especially troubling because otherwise, conditions in the housing market make this the perfect time to pursue a mortgage due to all-time low housing affordability rates.
Image: Patrick Feller, via Flickr