According to a survey by the National Association of REALTORS® (NAR), only half of surveyed households believe the economy is currently improving, nearly all young renters eventually want to buy a home, and a convincing majority still view homeownership as part of their “American Dream.”
The Housing Opportunities and Market Experience (HOME) survey data reveals that an overwhelming majority of current renters, 94 percent of them who are 34 years of age or younger want to own a home in the future. 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 were 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.
In our local market, we at the Reno/Sparks Association of Realtors are seeing rising rents, home prices and limited inventory as key factors.
According to the Apartment Survey for the 1st Quarter 2016, published by Johnson Perkins Griffin LLC, rental rates are up an average of $44 from the 4th Quarter 2015, and vacancy rates are down to 2.3 percent compared to 2.9 percent over the same period.
Rising rental rates may help some renters realize that homeownership is a viable option compared to renting, that is, if rising median home prices are not an obstacle.
The median home price for a single family residence in the Reno/Sparks area has been on the rise since January 2012. Median price is up 8.3 percent from April 2015 and down less than 1 percent from March 2016.
Reflecting the ongoing recovery of home values throughout most of the country, 89 percent of respondents said home prices in their communities have either risen or stayed the same in the past year. Looking ahead toward the next six months, 91 percent of respondents believe home prices in their community will increase or stay the same.
Local indicators would support that median price will continue to increase, although in smaller increments, through 2016.
April 2016 housing inventory levels are up 1 percent from March and down 6 percent from April 2015. The available inventory continues to be a challenge. In the Reno/Sparks market, homes priced under $400,000 have less than 4.5 months supply of inventory.
Despite these obstacles to homeownership both local and nationally, NAR’s survey found that more homeowners (82 percent) than renters (68 percent) believe that it’s a good time to buy a home. Among current owners, 61 percent believe it is a good time to sell a home.
According to the survey, roughly 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, 5 percent of renters have recently tried and failed to obtain financing for a home.
Young adults, who make up the majority of all renter households, seem optimistic about their future. As more of them settle down and begin plans to start a family, the allure of owning their own home as well as the long-term financial stability homeownership provides will drive their emergence into the housing market. However, the extent to how fast this occurs will greatly depend on more entry-level housing supply coming into the market and needed improvements in affordability conditions.
About NAR’s HOME Survey
In March through early December 2015, a sample of U.S. households was surveyed via random-digit dial, including half via cell phones and the other half via landlines. The survey was conducted by an established survey research firm, TechnoMetrica Market Intelligence. Each month, approximately 900 qualified households responded to the survey. The data was compiled for this report and a total of 9,034 household responses are represented.
William Process is the 2016 Reno/Sparks Association of REALTORS® president and a Realtor with HomeGate Realty of Nevada.