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LendingTree Ranks Most Competitive Housing Markets

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Although the national housing market has recently begun to cool off, there are still many places in the United States where markets remain highly competitive.

LendingTree, the nation’s leading online loan marketplace, ordered the 50 largest metropolitan areas in the United States based on an average of the city’s rank in three categories that contribute to the competitiveness of home buyers in an area:

  • Share of buyers shopping for a mortgage before identifying the house they want
  • Average down payment percentage
  • Percentage of buyers who have good or excellent credit (above 680)

These criteria were chosen because the average American cannot afford to pay cash for a home — this means that most Americans need good credit to secure a loan, and enough cash to be able to make a substantial down payment. A more competitive buyer has higher credit and the ability to put down larger down payments.

For more information about the three criteria, check the “Methodology” section below.

Key Findings:

Denver, Los Angeles, and Portland, Ore., have the most competitive buyers in the country. Buyers in these areas have higher than average credit and the ability to put down a larger down payment.

Birmingham, Ala., Virginia Beach, Va., and Pittsburgh have the least competitive buyers in the country. Living in a less competitive market can be beneficial for buyers as it means that the path to homeownership is less challenging than it is in other parts of the country. For example, in these three areas, only 43% of mortgage shoppers had prime credit, compared to an average of 49% across the 50 largest metros in the U.S.

The most competitive buyers live out west. Of the top 10 most competitive cities, only two, St. Louis and Boston, were not in a western U.S. state. High-paying tech jobs, common in places like Oregon, San Francisco and Seattle, likely help fuel market competitiveness in some western cities.

The average down payment percent in the top 10 most competitive metros is 16%, two points higher than the average down payment percent found across all the cities looked at in this study. As the housing market cools, this number may fall somewhat, as sellers and lenders accomodate more potential buyers.

63% of buyers in the 10 most competitive metros shopped around for a mortgage before settling on a house. Shopping around for a mortgage can not only help buyers save money — it can also help them become pre-approved for a mortgage, which makes it easier to purchase a home.

57% of buyers in the 10 most competitive metros have good or excellent credit. Across the 50 largest metros in the country, that number is only 49%. People who live in more competitive areas should make sure that they carefully monitor and maintain their credit scores.

Metropolitan areas with the most competitive buyers in the United States

Denver

Share of buyers who shopped around for a mortgage before settling on a house: 67%
Share of buyers with good or excellent credit: 56%
Average down payment: 16%

Los Angeles

Share of buyers who shopped around for a mortgage before settling on a house: 64%
Share of buyers with good or excellent credit: 55%
Average down payment: 17%

Portland, Ore.

Share of buyers who shopped around for a mortgage before settling on a house: 65%
Share of buyers with good or excellent credit: 57%
Average down payment: 15%

Least competitive metropolitan areas in the United States

Birmingham, Ala.

Share of buyers who shopped around for a mortgage before settling on a house: 59%
Share of buyers with good or excellent credit: 36%
Average down payment: 12%

Virginia Beach, Va.

Share of buyers who shopped around for a mortgage before settling on a house: 58%
Share of buyers with good or excellent credit: 47%
Average down payment: 12%

Pittsburgh

Share of buyers who shopped around for a mortgage before settling on a house: 55%
Share of buyers with good or excellent credit: 45%
Average down payment: 13%

How to shop smarter in a competitive real estate market

Regardless of the level of competition in your area, being a well-prepared buyer increases your odds of securing that dream home. Use these tips to make your offer stand out:

Shop for a mortgage before you shop for a house. The most significant of our three variables is having financing in place before anything else. Not only does this give you time to compare mortgage offers from several lenders and choose the best terms for your needs, but if you show up at the negotiating table with an offer of financing already in place, you’re giving yourself an edge over the competition. In some cases, shopping around for the lowest rate on a mortgage can help you save tens of thousands of dollars over the lifetime of your loan.

A good place to start planning is on LendingTree’s marketplace, where you can fill out a short online form and potentially get quotes from several lenders.

Improve your credit score. Credit scores don’t just determine if you will get approved for a mortgage. They also have a big impact on the rate and fees you’ll pay, and that adds up to tens of thousands of dollars on a mortgage. Find out what credit score you need to get a mortgage.

Save a larger down payment. Lenders view the down payment as your “skin in the game,” so a larger amount saved increases your financing options. If you do not have a large amount already saved, there are programs in place to assist borrowers.

Improving your credit score and saving for a larger down payment may take some time. So, if you are a buyer with a lower down payment amount or non-prime credit, find a lender to pre-approve your mortgage and level the playing field so you can compete regardless of being in the hottest or most accessible housing markets in America.

Methodology

For this study, we looked at nearly 1.5 million purchase mortgage loan requests that came through LendingTree’s marketplace throughout 2018. We used data pulled from those requests to rank the top fifty largest Metropolitan Statistical Areas (MSAs) in the United States. The categories in this study were chosen based on the following reasons:

The share of buyers shopping for a mortgage before identifying the house they want: Buyers who shop around for a mortgage are usually better prepared to take on the housing market. This is because they have a better idea of what kinds of loans they might qualify for. Beyond that, buyers who shop around have a greater chance of being pre-approved for a mortgage. Those who are pre-approved are often seen as more appealing to sellers and can better compete with cash buyers because they are don’t need to go through a potentially lengthy loan approval process after they decide to buy a house.

Average down payment percentage: Having more money saved for a down payment can help buyers get a lower interest rate on what they borrow. It can also help them secure a larger loan. Typically, the more money that is put towards a down payment, the stronger the offer is.

Percentage of buyers who have good or excellent credit (above 680): Borrowers with higher scores have more financing options and can make more competitive offers because they can often secure higher loans than those with credit below 680.

To get a metro’s overall ranking, we averaged its rank in the three aforementioned categories.

 

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