The many benefits of homeownership have been documented both for homeowners and for their communities. Evidence has shown that that owner occupied properties are better maintained than other properties (Galster, 2983, Harding et al., 2000), that homeowners invest more in social capital (Green and White, 1997, and Haruin et al., 2002), and that children growing up in owner-occupied dwellings have higher high school graduation rates and cognitive test scores than those who do not, which can potentially confer benefits to others (Green and White, 1997, and Haruin et al., 2002). Indeed, Coulson and Herman (2013) find that transitioning a home from rental to ownership in a typical neighborhood would create about $1,327 per year in externality value to surrounding properties.

However, little is known about which financial deficiencies pose the greatest barrier to becoming a homeowner. Specifically, when an individual walks through the door of an affordable housing organization, what is the hardest barrier for her to overcome before she is ready to purchase a home?  Is it high debt, low credit, inadequate savings, or some combination of the three?

In this study we examine these three barriers to homeownership and their impact on the probability of becoming a homeowner. Using client level data from a large affordable housing non-profit in New Mexico and controlling for income and other demographics, we estimate the impact that each of these deficiencies has on the likelihood that an individual will become buyer ready and subsequently purchase a home. We also create deficiency indices from the three variables to determine which combinations and intensities most affect home purchase. Finally, we estimate a parametric duration model with a proportional hazard function to examine the impact that these initial deficiencies has on the length of time it takes to achieve these goals or drop out of the program.

Initial results indicate that of the three, insufficient credit is the hardest individual barrier to overcome. A mix of all three deficiencies causes the greatest difficulty, with the combination of lack of savings and insufficient credit following closely behind. These results can help to inform policy makers and practitioners about how to better target their resources towards the barriers to homeownership that are the hardest to overcome.