NerdWallet on crunching housing market numbers

“People underestimate the cost of homeownership”

NerdWallet on crunching housing market numbers

As someone with an inherent love of numbers and architecture it’s perhaps not surprising that Elizabeth Renter (pictured) should land a job as data analyst at fintech company NerdWallet.

“The mortgage industry is fascinating. I love houses; I love architecture, and the housing market also has some of the richest, publicly available data - there’s really a lot to look at and a lot to dig into,” she said.

Renter joined NerdWallet in 2014 following a long trajectory analyzing three key areas - finance, justice and health. She now works heavily on collaborative projects, analyzing key data and crafting surveys for the personal finance company.

Having sold and purchased a house as recently as December, Renter said she knew firsthand the ups and downs of homebuying, acknowledging that the entire process could be “an uphill battle”.  

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She said: “Buying a home is never easy, but right now, it’s probably the hardest time to buy that many of us have ever seen, so my advice would be to really think hard about whether now is the right time (to purchase a home).”

This week marks her seventh anniversary at the company, at a time when booming home prices and property shortages were the biggest factors conspiring against buyers.

She said: “I think it becomes a little scarier when these huge decreases in inventory and these climbing prices are no longer surprises.”

Putting off that dream house purchase for a year while improving one’s credit score, or saving more cash for that all-important down payment, may be anathema for a lender, but Renter said it should be an option for buyers who can’t handle the stress of the house-buying process.

If that isn’t an option, she advised first-time buyers to resist the temptation of getting drawn into a bidding war, but added that originators also had a crucial role to play in guiding buyers.

Read more: NerdWallet shares housing market predictions for second half of 2021

“Mortgage brokers are in a great position to help educate borrowers about how much they want to borrow, and how much is a good idea for them to borrow,” she said. “At NerdWallet we recommend that just because you qualify for this huge mortgage, it doesn’t necessarily mean it’s the best idea to max out that potential amount.”

Renter stressed the importance of giving the right kind of advice, especially when something as financially far-reaching as the purchase of a home is at stake.

“A lot of buyers right now are going to feel the pressure to win that bidding war, and to be the victorious party…and they may come back and ask for more money.

“If brokers and lenders see them as a good risk, they may increase the amount that they can loan them, but I do think there’s a duty there to educate the borrowers and say ‘you’re approved for this amount, but let’s talk about what that means for your monthly payments’,” she added.

NerdWallet’s annual homebuyer report often throws up uncomfortable home truths for homebuyers; a form of buyer’s remorse - or the equivalent of a long-lasting hangover.

She said: “We’ve asked in the past what they regretted about buying their latest home, and what we’ve found is that a lot of people underestimate the cost of home ownership.

“They look at the mortgage payment, but they’re not giving enough weight to maintenance costs, HOA (homeownership association) dues, homeowner’s insurance and the sort of ongoing costs that they never had to think about as a renter.”

Renter admitted interpreting data in the wake of the pandemic posed huge challenges, even for an expert like her. 

“The data tells us sort of what is happening, but it doesn’t tell us why it’s happening. I think we’re all making our best educated guesses, but we are really in unchartered territory,” she said.

“We already had a housing shortage and housing prices were rising faster than incomes before the pandemic. But then you add the pandemic to the mix and it sort of throws everything into disarray. Predicting consumer behavior becomes more difficult in situations like this.”

In NerdWallet’s latest homebuyers’ report, Americans overwhelmingly said they planned to purchase a home in the next 12 months. The only problem with that sentiment is that there are just six million homes purchased every year in the US.

For Renter, the results showed that at least one thing remains constant, regardless of market conditions.

“One thing I can predict in the next survey - because I’ve seen it every year that we’ve asked these questions - is that an overwhelming number of people are going to be optimistic, and they’re going to say that they’ll plan on buying within the next 12 months,” she said.