A Shift in Payment Priorities

Homebuyers shift payment priorities

U.S. News & World Report recently published an article that indicated a pretty dramatic change in the way homeowners are now tackling their debt.

According to the article, a study released by Transunion showed that Americans are increasingly more likely to make payments on their credit cards before payments on their mortgages. The data shows that roughly 6.6 percent of borrowers paid credit cards first in the third quarter of 2009, up from just 4.3 percent in the first quarter of 2008.

This is a shift in the historical norm; which has long been slanted toward house payments as a priority ahead of other bills. Credit the housing bust nationwide for the change.

 As homeowners struggle with unemployment and drops in their homes’ value, they have perhaps become reluctant to commit more money into an asset that might not be worth what they owe on it. Whereas keeping up with credit card payments continues to give them access to necessities such as gas, clothing and groceries.

It also probably signifies part of the issue that caused the housing bust. Access to no-money down or low-down payment loans that proliferated the market during the housing boom allowed buyers to get into homeownership without much “skin in the game.”

In the days of 20-percent down payments, homeownership was something you worked for, saved up for and therefore something you were less likely to give up so easily. It’s a lesson that you can bet banks are heeding.