Low credit scores hampering home sales

The poor economy and volatile stock market has pushed down many distressed consumers in the past few years, hindering their ability to qualify for a new home loan or refinancing. This stifling of borrowers is making it difficult for consumers to take advantage of low mortgage rates and home prices, hurting home sales and impeding any recovery in the housing market.

A recent study from FICO found 50 million American consumers had their credit scores drop more than 20 points between 2008 and 2009 concurrent with the economic downturn. Of these consumers, nearly 21 million lost more than 50 points on their scores, and many dropped more than 100 points due to severe delinquencies.

However, despite limited opportunities for many borrowers in the housing market, housing price indicators suggest the market is showing signs of improvement. The RPX Monthly Housing Report for September found home prices continue to drop due to the imbalance of supply and demand in the housing market, but the existing home inventory has dropped. This suggests the demand and supply ratio could even out in the future, which in turn could stabilize prices. 

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