GoLocalProv | RI’s real estate demand explodes

Monday, April 5, 2021

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Housing prices in Rhode Island and across the country continue to climb. But another factor is making home ownership even more difficult – increasingly high credit scores for mortgage approval.

Rhode Island homebuyers face an increasing number of challenges – skyrocketing prices, lack of supply, and rising credit scores for mortgages.

The median price of a single-family home in February in RI was $ 320,000, a 16.4% increase from 12 months earlier.

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It’s now year after year double-digit price increases.

But this price explosion is different from those of the past.

According to the Wall Street Journal, “Home prices are rising at the fastest rate in 15 years, propelled by a record supply of homes for sale and an influx of well-to-do workers looking for second homes or office space in the city. home. The median price of an existing home surpassed $ 300,000 last summer and has stayed there ever since. “

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Lenders demand higher credit scores PHOTO: File

Homeownership rate much lower than 2004

The homeownership rate continues to rebound from a current low of 63.7% in 2016, but is considerably lower today than it was in 2004, when it hit the peak of 69.2%.

In 2020, homeownership was 65.9%.

Credit standards are getting tougher

“Because mortgage credit is more difficult to obtain, it is an overall more competitive environment,” said Dr. Lawrence Yun, chief economist at the National Association of Realtors. the Wall Street newspaper.

About 70% of mortgages issued in 2020 went to borrowers with a credit score of at least 760, up from 61% in 2019, according to the Federal Reserve Bank of New York.

The median credit score of borrowers approved for mortgages reached 786 in the fourth quarter of 2020, up from 770 during the same period in 2019.

Low income borrowers are also negatively affected. “Stricter credit requirements have emerged more clearly at each end of the mortgage market. The average credit score of borrowers approved for Federal Housing Administration loans rose to 672 in fiscal 2020, from 666 in 2019 . FHA loans generally have lower income and less down payments, ”WSJ reports.

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About Jessica Zavala

Jessica Zavala

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