Consumers Spend more Time Researching Auto Purchase than Home Loan

SEATTLE, April 3, 2008 /PRNewswire/ — Despite the fact a home is one of the largest and most expensive purchases most Americans will ever make, those adults who have obtained or refinanced a home loan in the past 5 years typically spent only 5 hours researching a home loan, according to a recent survey(1) of 2,897 adults conducted by Harris Interactive(R) on behalf of leading real estate website Zillow.com.

In fact, more time is typically spent researching a car purchase (8 hours) or major home improvements, such as a kitchen remodel (10 hours), and equal time is spent planning a single vacation (5 hours)(2). When calculated as time spent per dollar invested, this means Americans typically spend almost 80 times more time researching their vacation (.159 min./dollar) than a home loan (.002 min./dollar).

In retrospect, borrowers seem to indicate a desire to be more informed in the future. Those who obtained or refinanced some type of mortgage or home loan in the last five years secured an average of 4 quotes, but those who plan to obtain or refinance a mortgage or home loan within the next year say they expect to obtain 6 quotes, on average.


    Home-Related         Typical Hours     Average Cost         Minutes Spent
    Investment           of Research(2)                          Per Dollar
     Vacation                   5          $1883(3) per week         .159
     Mortgage or Home Loan      5          $135,313(4) (home)        .002
 
     Car                        8          $28,7159(5)               .017     
     Home                      39          $224,890(6)               .102
     Major Home Improvements   10          $47,500(7)                .013
     Computer                   4          $3000(8)                  .080
     Television                 2          $783(9)                   .153

Of adults who say they plan to be in the market for a mortgage or home loan in the future (mortgage, refinance, HELOC or other home loan), 82% of them say they have concerns about doing so. The primary concern among these borrowers is having their personal information sold or shared with multiple lenders (58%). The top five concerns:

  • Having personal information sold or shared with multiple lenders (58%)
  • Sharing personal information and credit score with multiple lenders (55%)
  • Missing the opportunity to get the best rate 54%)
  • Ending up with a monthly payment that is greater than original budget (48%)
  • Not understanding the terms and financial implications of the loan (41%)

"What most people don't realize is the type and terms of a loan are often more significant than the actual purchase price as these factors can dramatically affect the affordability of a home," said Spencer Rascoff, Zillow chief financial officer. "Financing a home is one of the largest investments most people will make in a lifetime yet people typically put more time into buying a car and as much time into researching a single vacation than they do a home loan. Despite this clear imbalance of effort, we're encouraged that borrowers, on average, say they plan to secure more quotes on the loan they plan on obtaining or refinancing within the next year, which we think signals a desire for greater options and information to help alleviate the primary concerns of borrowers."

Of those who plan to be in the market for a home loan in the next  year:
  • Nine out of 10 (91%) agree a standardized quote form would make it easier to compare loan quotes from multiple lenders.
  • 82% believe the recent interest rate cuts by the Federal Reserve make it more attractive to shop for a home loan.
  • 77% say they would obtain more mortgage or home loan quotes if they could do so anonymously.
  • 61% rely/would rely on others' input when selecting a mortgage lender.
  • 56% would obtain more mortgage or home loan quotes if I had more time to do so.

"Zillow has expanded into the home financing arena with today's launch of Zillow Mortgage Marketplace that we designed to help illuminate the complicated lending process and provide borrowers greater control and transparency than exists elsewhere and addresses many of the common borrower concerns and preferences," added Rascoff.

Footnotes
  1. The Home Spending survey was conducted online by Harris Interactive within the United States on behalf of Zillow.com between March 6 and March 10, 2008, among 2,897 adults ages 18+, of whom 1,821 are homeowners. This online survey is not based on a probability sample and therefore no estimates of theoretical sampling error can be calculated; a full methodology is available.
  2. (Median number of hours among adults who purchased each item and spent at least one hour researching and shopping before doing so. Sample sizes vary.
  3. AAA 2007 Vacation Costs Survey. Cost per day for a family of two adults and two children.
  4. Based on averaging loan type data from the MBA's Residential Mortgage Market and Its Economic Context 2007 report.
  5. Auto Affordability Index compiled by Comerica Bank in Detroit for Q4 2007.
  6. (Zillow Q4 Report Zindex(R) Median Home Value Indicator
  7. Based on averages from Remodeling magazine.
  8. WikiAnswers
  9. Consumer Electronics Association
Source: Zillow.com


Posted by Mark Rodrigues at 5/30/2008 5:13 PM
Categories: Psychology, Mortgage, Lending
 

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