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New York Fed Finds Large Debts Causing a Bottleneck in Homeownership

You might hear in the news that skittishness on future home prices is what’s keeping people out of the housing market. Many people don’t want to end up with an underwater house that can require a short sale or New York bankruptcy to resolve. Indeed, many New York homeowners are supposedly in pre-foreclosure and median rents in New York City are well above the proportion of gross income that experts think people should be paying. There might be good news to counter these dire trends: According to a study by researchers at the Federal Reserve Bank of New York in Manhattan, first-time homebuyers blame credit and income problems as the primary reasons for keeping them out of the housing market.

As a bit of background, since the Great Recession, the U.S. homeownership rate has been depressed, and it’s especially down for younger householders. To make things worse, houses sold to new homeowners can comprise a large chunk of total home sales and generally drive economic recoveries. If such households don’t enter the housing market, economic stagnation might result.

So, the New York Fed economists investigated why renters staying away from homeownership by interpreting data from the recently produced Survey of Consumer Expectations, which included a special “module” that covered housing issues for 867 homeowners and 344 renters. They found two things. One, less than 45 percent of renters expected to move and buy a home within the next three years, even though more than 60 percent of renters expected to move in three years. This suggests pessimism among renters that they’ll be homeowners any time soon.

Two, for renters who gave a likelihood of purchasing a house at 60 percent or less, the number one reason was too much debt and not enough savings. Number two was low income, followed by poor credit.

Contrary to popular belief, concern that house prices would fall was the last reason renters gave.

The New York Fed study can be found here.

For all those renters who think that their consumer debts (or creditworthiness) stand in the way of homeownership, I’ve already provided the reasons for why bankruptcy might actually help. People who owe federal student loans can avail themselves of income-sensitive repayment options, and credit card debt can usually be discharged in chapter 7 without too many hassles and even boost to credit scores. If you think your debts are keeping you out of a home, talk to an experienced bankruptcy lawyer.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA

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