Pandemic Homebuyers Report Buyer’s Remorse

Some homebuyers could be experiencing a spell of buyer’s remorse, according to a new survey from LendEDU. With mortgage rates at an all-time low, home purchases and refinances soared during the pandemic, with purchases up 22% and refinances up 84% compared to the same period last year. To review these trends, LendEDU surveyed 1,000 homeowners with an outstanding mortgage, and it found that 55% of new homeowners regret taking out a mortgage during the pandemic. 

Of existing homeowners with an outstanding mortgage, 6% have taken out a mortgage during the pandemic, and 72% of new homeowners said they decided to purchase their home because of the low interest rates triggered by the pandemic. Of the 55% expressing remorse, 30% wish they had waited to purchase a home for financial reasons and another 7% of new homeowners said that they are not prepared for homeownership. 

It isn’t surprising that the pandemic brought a surge in new homeownership rates. Following the start of the pandemic and the subsequent economic turmoil, mortgage rates hit all-time lows. Simultaneously, the outbreak significantly impacted city centers like Los Angeles and New York City, and offices shut down and businesses adopted work-from-home policies. The combination catalyzed demand for suburban homes in “safer” sprawling markets outside of city centers. 

In addition, home prices have continued to increase during the pandemic. The National Association of Realtors published a Q2 report on the residential home market. The report revealed that 96% of US markets reported increased home prices. The pricing trend combined with lower mortgage rates may also have encouraged new homebuyers to enter the market, contributing to the surge in sales volumes.  

New homebuyers weren’t the only demographic fueling mortgage activity. Most of the new mortgage volumes 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 refinanced to obtain a more favorable rate. Rates declined so quickly, in fact, that some new homeowners refinanced almost immediately to take advantage of the lower rate environment. 

However, it hasn’t been a fairytale for everyone. The survey also revealed that 54% of homeowners have seen negative credit marks for something like a missed payment, even if they had opted for a forbearance. In addition, 41% of homeowners have had trouble making their mortgage payment during the pandemic. Job loss or financial problems were the top reasons why homeowners are struggling to make a mortgage payment. New homeowners are seeing the most significant challenge keeping up with mortgage payments, with 23% of this demographic reporting job losses. 

Luckily, mortgage lenders have remained flexible during the pandemic. The survey found that 18% of homeowners have been granted a forbearance and 25% have agreed to a reduced monthly payment. However, in many ways, these forbearance policies have led to incorrect negative credit reporting. While this has become an issue for many, 60% of homeowners were able to resolve the error and an additional 10% were working toward resolving the error.