Although only half of surveyed households believe the economy is currently improving, nearly all young renters eventually want to buy a home, and a majority still views homeownership as part of their American Dream, according to a recent quarterly consumer survey by the National Association of Realtors (NAR).
Additionally, a newly-introduced index tracking the financial outlook of households found that compared to earlier this year an increasing share believes their personal financial situation will improve in the months ahead.
NAR’s inaugural quarterly household survey, Housing Opportunities and Market Experience (HOME), tracks topical real estate trends, including current renters and homeowners’ views and aspirations regarding homeownership, whether or not it’s a good time to buy or sell a home, and expectations and experiences in the mortgage market.
Most Want to Own in Future
The HOME survey data confirmed that an overwhelming majority of current renters who are 34 years of age or younger want to own a home in the future (94 percent). Overall, 83 percent of polled renters have a desire to own, and 77 percent believe homeownership is part of their American Dream.
Lawrence Yun, NAR chief economist, says the survey’s findings debunk the notion that young adults aren’t interested in buying a home. “Despite entering the workforce during or immediately after the worst of the financial and housing crisis, the desire to become a homeowner appears to be a personal goal for a convincing majority of young renters,” he said. “Furthermore, there appears to be sizeable, pent-up demand for buying that currently remains untapped because of a variety of economic and personal reasons impacting many households.”
The top two reasons given by renters for not currently owning was the inability to afford to buy (53 percent) and needing the flexibility of renting rather than owning (19 percent). When asked what would likely be the main reason for buying in the future, renters cited lifestyle considerations such as getting married, starting a family or retiring (33 percent) and an improvement in their financial situation (26 percent).
“A combination of factors such as rising rents and home prices, limited supply, repaying student debt, and getting married and having children later in life has more to do with the currently underperforming share of first-time buyers than the idea that buying a home is not as desirable as it used to be,” adds Yun.
Views of Economy
Among all households (renters and homeowners) in the survey, the results highlight a split between those who agree the U.S. economy is on the right track and those who disagree. Only half of respondents believe the economy is currently improving, and 44 percent think the economy is actually in a recession.
Renters were only slightly more optimistic about current economic conditions, with 57 percent believing the economy is improving. Regardless of their confidence in the U.S. economy today, over three-quarters (76 percent) of those who don’t think the economy is improving still want to eventually buy a home.
“The promising stretch of job creation in several parts of the country in recent years has the housing market in 2015 on track for its best year of sales since the downturn,” says Yun. “However, that only half of surveyed households believe the economy is improving can be attributed to the fact that some areas have been slow to recover and wages have yet to grow in a meaningful way for far too many families.”
Adds Yun, “With roughly 26 million more people in the U.S. compared to the peak year of home sales in 2005 (7.08 million), the pace of existing sales would likely be more robust if not for the economy’s subpar growth since the downturn and wage gains that have failed to keep pace with rents and home prices.”
At least 85 percent of surveyed households in each age category as well as across all education levels believe homeownership is part of their personal American Dream. The most appealing aspects of homeownership cited by those with this feeling include a place to raise a family (36 percent), owning their own place (26 percent) and a nest egg for retirement (14 percent).
According to the survey, approximately two-thirds (65 percent) think it would be very or somewhat difficult to obtain a mortgage. Furthermore, there are differences among income brackets. Renter households making between $30,000 and $40,000 were the most likely to be declined a mortgage (10 percent), while 51 percent of those who make more than $50,000 a year have not tried but feel confident they would succeed in getting a mortgage. Overall, five percent of renters have recently tried and failed to obtain financing for a home.
The NAR survey highlights the importance of developing a renter marketing campaign. Loan originators should look for ways to promote homeownership to renters by sending mailers and e-mail updates, offering “From Renter to Homeowner” workshops, writing articles on the “how to” of first-time homeownership, adding appropriate information to your website and Facebook page, emphasizing your interest (in this niche) to Realtors and other strategies.