The Reason Most Buyers Can’t Get A Home Under $100k | Paper Source Online
Published by REALTOR.com | December 30, 2020
In November, there were more than 50,100 listings nationwide for single-family homes priced at $100,000 or less on realtor.com®
Across the nation, home prices have shot up to unheard-of heights even during the pandemic—because there are still people hunting for homes (preferably with their own yard and space for an office and home-schooling), but not enough inventory available.
Yet there are pockets of the country where the real estate market is still struggling. Oddly enough, these are places where folks can become homeowners for under $100,000— and spend less each month on homeownership than they do on rent. There is just one big problem: Even buyers who can qualify for a mortgage, often can’t get one.
That’s because it’s typically not profitable for lenders to do small-dollar mortgages, as loans at $100,000 or less are called. And the onset of the COVID-19 pandemic may have made things worse, as lenders are even more focused on larger, more lucrative mortgages. The upshot is that would-be buyers in many communities of color, which tend to be lower-income, are unable to achieve homeownership and set on a path of building wealth.
Instead, investors who don’t live in these communities swoop in and scoop up properties in all-cash deals. The homes are then turned into rentals, with predominantly Black and Hispanic tenants who may pay hundreds of dollars more each month than they would on a mortgage. And the neighborhood suffers as locals aren’t as invested in upkeep and advocating for more resources.
There are plenty of more affordable homes out there. In November, there were more than 50,100 listings nationwide for single-family homes priced at $100,000 or less on realtor.com®. And they aren’t all foreclosures and teardowns. The listings are often in smaller or midsize cities, particularly ones where the local economy has suffered. But these homes are also easy to find in the suburbs as well as in rural areas, where land and real estate are typically cheaper.
Business is booming at most lenders thanks to record-low mortgage interest rates and the rush of buyers entering the market. With a backlog of both buyers and existing homeowners seeking to refinance their mortgages, lenders can be pickier over the business they accept. That means borrowers seeking less profitable loans are more likely to lose out.
The pandemic, and the ensuing economic pain and high unemployment that it caused, has made it even harder for lower-income borrowers to receive small-dollar loans.
Comments are closed.