Single women are better mortgage risks than single men – so why are they charged more?
By Kenneth Harney
(reprinted in part from The Washington Post September 7, 2016)
The effects of gender and marital status on mortgages don’t get a lot of research attention in real estate, but two new reports examine the exceptional role of single women in the home-purchase marketplace and the challenges they face in getting a loan.
A couple of highlights:
- Single women are statistically better at paying their mortgages than men – they default less often – yet they get charged more for their loans and are denied credit more often. Although they have lower incomes, on average, than single men, they tend to make larger down payments, according to researchers at the Housing Finance Policy Center of the Urban Institute.
- Single women are now the second largest group of buyers in the marketplace, accounting for 15-20 per cent of all home purchases in recent years. Single men, by contrast, have accounted for about 9 per cent of purchases since 2012.
Married buyers once represented more than four-fifths of the market, but that has declined over the past several decades. In 1985, married couples made 81% of all purchases; last year it was 67 per cent.
You might assume that unmarried couples have taken up the slack, but that’s not the case. Last year, according to a new research note titled “All the Single Ladies” by Jessica Lautz, managing director of survey research at the National Association of Realtors, unmarried partners accounted for just 7 per cent of total sales.
The Urban Institute study, conducted by Laurie Goodman, co-director of the Housing Finance Policy Center, and Jun Zhu, a senior research associate, looked at a national database of mortgage transactions compiled by the federal government, along with proprietary information on borrower-credit characteristics and properties from CoreLogic, an analytics firm.
The study is blunt about its core conclusions: Single woman pay slightly more for their mortgages despite their superior repayment performance. They tend to present “somewhat weaker credit characteristics” at the application stage, and, as a result, are more likely to end up with subprime, or higher-cost, financing.
But there’s an inequity in the system in light of women’s statistically lower rate of defaults. Single women are “paying too much” for their home loans. “Given that more than one third of single women borrowers are minorities, and almost half of them live in low-income communities,” the authors argue that, in fairness, “we need to develop more robust and accurate measures of risk to ensure that we aren’t denying mortgages to women who are fully able to make good on their payments”.
(Added comment from Finet of Saratoga: Amen!)