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LendingTree Ranks Housing Markets With the Most Competitive Buyers

While low rates are likely to benefit many would-be buyers, many housing markets are more competitive than ever.

In fact, low inventory is pushing home prices up, and lenders have tightened their borrowing standards amid the ongoing COVID-19 pandemic. That means that borrowers who may have been more easily approved for a loan at the start of the year could now find themselves facing an uphill battle to get a loan and buy a home. As a result, buyers must remain highly competitive if they hope to purchase a home.

To find out where homebuyers are the most competitive, LendingTree, one of the nation’s leading online loan marketplaces, ranked the 50 largest metropolitan areas in the United States based on three categories:

  • Average down payment percentage
  • Share of buyers who have credit scores above 720
  • Share of buyers who shop around for a mortgage before looking for a house

These criteria were chosen because they each play an important role in a buyer’s ability to get a home loan. Since 62% of homebuyers obtain a mortgage to purchase a home, those who are strong in these categories will likely have a competitive advantage over other homebuyers.

Key findings

San Jose, Raleigh and Pittsburgh have the most competitive homebuyers. Because the homebuyers in a given metro are deemed more or less competitive based on an average of individual rankings across three categories, metros can top LendingTree’s list even if they aren’t strong in every single area. For that reason, San Jose is first overall despite being ranked 33rd in the shopping for a mortgage category.

Highly competitive homebuyers live across the country. California is the state with the most metros in the top 11, but metros in other states — from North Carolina to Massachusetts — also have the most competitive buyers.

Memphis, Tenn., Virginia Beach, Va. and Oklahoma City have the least competitive buyers in the country. Buyers in these metros tend to have lower credit scores, smaller down payments and are less likely to shop around for a mortgage before choosing a home.

The average down payment in the top 11 metros with the most competitive buyers is 21.4%. In the 10 metros with the least competitive buyers, the average down payment is 18.5%. Typically, larger down payments make buyers’ offers more appealing to sellers. As a result, more competitive buyers will generally put down more on a home.

Nearly 71% of buyers in the 11 metros with the most competitive buyers have credit scores of at least 720 or higher. For the 10 least competitive-buyer metros, it’s 63%.

Seventy-two percent of buyers in the 11 most competitive buyer metros shopped around for a mortgage before looking for a house. Around 60% of potential buyers in the 10 least competitive metros can say the same.

Metros with the most competitive homebuyers

No. 1: San Jose, Calif.

  • Median down payment percentage: 25.0%
  • Share of buyers with a credit score of 720 or higher: 85.7%
  • Share of buyers who shopped around for a mortgage before looking for a house: 65.7%

No. 2: Raleigh, N.C.

  • Median down payment percentage: 19.7%
  • Share of buyers with a credit score of 720 or higher: 71.8%
  • Share of buyers who shopped around for a mortgage before looking for a house: 76.6% 

No. 3: Pittsburgh

  • Median down payment percentage: 22.2%
  • Share of buyers with a credit score of 720 or higher: 64.3%
  • Share of buyers who shopped around for a mortgage before looking for a house: 75.1%

Metros with the least competitive homebuyers

No. 1: Memphis, Tenn.

  • Median down payment percentage: 18.5%
  • Share of buyers with a credit score of 720 or higher: 56.9%
  • Share of buyers who shopped around for a mortgage before looking for a house: 51.4%

No. 2: Virginia Beach, Va.

  • Median down payment percentage: 18.8%
  • Share of buyers with a credit score of 720 or higher: 59.9%
  • Share of buyers who shopped around for a mortgage before looking for a house: 54% 

No. 3: Oklahoma City

  • Median down payment percentage: 19.5%
  • Share of buyers with a credit score of 720 or higher: 59.5%
  • Share of buyers who shopped around for a mortgage before looking for a house: 52.7%


Methodology

For this study, we looked at nearly half a million purchase mortgage loan requests that came through LendingTree’s marketplace from January through July 2020. We used data pulled from those requests to rank the top 50 largest Metropolitan Statistical Areas (MSAs) in the U.S. in three separate categories before averaging those rankings to get our final order.

The categories in this study were chosen for the following reasons:

Average down payment percentage: Larger down payments show sellers that potential buyers have the financial stability and means to purchase a home. As a result, sellers may have more confidence in offers from prospective buyers who make larger down payments.

Percentage of buyers who have a credit score of 720 or above: Buyers with higher credit scores have a competitive advantage when getting a mortgage because lenders look closely at your credit score to determine your creditworthiness and risk. This means borrowers with higher scores are more likely to be approved for a loan than those with credit scores below 720.

The share of buyers who shopped around for a mortgage before looking for a house: Buyers who shop around for a mortgage using a platform like LendingTree have the potential of being matched to multiple lenders who compete for their business. By making lenders compete, buyers have a greater chance of being preapproved for a home loan that suits their needs. Buyers who are preapproved when they make home offers may appeal more to sellers. Why? Because they’ve shown they meet the basic guidelines for the loan they’re applying for. This factor is especially important today because of tightened lending standards that can make getting a loan harder for some buyers.

LendingTree research analyst Jacob Channel contributed to this study. 

 

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