A new survey conducted by Mphasis Digital Risk of 1,386 people aged 46 years old or younger found that 66% of this group indicated that they “routinely” go online to check the value of homes belonging to friends and acquaintances and are filled with envy of what others have compared to what they have.
The survey also indicated that 79% of respondents who look up home values online said that this activity left them feeling stressed, concerned, or downright upset. In addition, 74% indicated that they currently own a home—these results come as more U.S. adults primarily use digital tools for financial services activities and demonstrates the need for lenders and other service providers to meet consumers where they typically want to do business: online.
Diving deeper, the main driving force of people comparing home prices use the information they gleaned as a way to “benchmark to measure their own income and worth” (59%), “to get a sense of their friends' incomes” (42%), and 56% say their own home-buying decisions are “very much” or “somewhat” affected by their searches online.
Jeff Taylor, Founder and Managing Director of Mphasis said: "For the 80% of Gen Z and millennials stressed by viewing home prices of friends and acquaintances online, they should remember that lenders don't benchmark borrowers against others to qualify for a home loan. They use the borrower's profile, and you would be surprised how much a borrower can afford. Even with interest rates entering the Summer of 2023 higher at near 7%, millions of people qualify to buy median-priced homes with as little as 5% down."
Three-quarters of respondents (74%) agreed that owning a home is "part of the American Dream," almost nine in ten (87%) said it is "currently too expensive to purchase a home," and only six percent said now is an ideal time to enter the market and look for a home. The results underscore that even if newer prospective homeowners are concerned about the market, they still regularly use digital tools to evaluate their prospects, providing an opening for lenders to move more of their services to digital formats as well.
Notably, those surveyed chiefly blame the government for the lack of housing affordability, and in particular, would like authorities to loosen restrictions on lenders and zoning laws:
- 45% say state and local governments are to blame for current housing prices.
- 70% say the government "hasn't done a good job" of making homes affordable.
- Many say the government should simply ease up on regulations that may inflate costs, with 62% calling for looser consumer protection rules and restrictions on lenders.
- On the local level, 72% say municipalities are more lenient on zoning rules to allow for more homes, or alternative types of homes (such as modular or 3D printed).
"It's surprising to see that 62% of younger Americans call for lower consumer protection rules and restrictions on lenders," added Taylor. "These rules were put in place after the Great Financial Crisis—which was caused by overly loose lending guidelines—to protect borrowers from getting into loans where the costs are low to start, then ballooned later.
"But, first-time buyers should definitely talk to their local lenders, because there are many specialty loans and down payment assistance programs that can help them [get into a home] in their community. These great Federal, state, and local programs never make headlines, but they exist, and your local lender knows about them."
Although recently existing home sales have been stagnant, an increasing number of people have been taking out home equity lines of credit (HELOCs). Forty-two percent said if they took out one of these lines of credit they would use it for home improvements, while 37% would use it to pay off medical expenses or debt, and 28% would use it to pay for day-to-day expenses. Overall, 40% of respondents said they would opt for a HELOC over other options, including bank loans and credit cards.
"Home appreciation in recent years has given an overall wealth lift to homeowners, and responsibly tapping into this new equity is a good option for homeowners. This kind of loan has lower rates than personal loans or credit cards, but borrowers should remember that interest on one's home equity loan is not tax deductible like it is on your first mortgage unless you use the home equity loan funds for home improvement."