Despite only half of all surveyed households believe that the economy is currently improving, the majority still view homeownership as part of the American Dream, with almost all young renters indicating they aim to buy a home some day. This, according to the National Association of Realtors’ (NAR’s) new quarterly survey, Housing Opportunities and Market Experiences (HOME), released for the first time today.
The association has surveyed over 9,000 renters and homeowners on the topic of homeownership, the economy and their personal financial outlook.
As part of this survey, a new index has been unveiled to track the financial outlook of households found that compared to earlier this year. This first index revels that an increasing share believes their personal financial situation will improve in the months ahead.
NAR says they’ll add new questions to the survey each quarter to reflect timely topics impacting real estate.
Young people actually do want to own
In recent years, it has become commonly accepted that millennials don’t wish to own a home, yet the HOME survey says otherwise: 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.
Dr. 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,” Dr. Yun 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.”
So why don’t renters currently own?
We recently dug into rentership, noting that by the technical definition of “affordable,” most renters can’t afford their rent.
This lines up perfectly with the HOME survey result, wherein renters indicated that they don’t own because they believe they can’t afford it (53 percent), and the need for flexibility (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.
Are we optimistic about the economy or not?
One of the most fascinating aspects of the study is that Americans are split, with nearly half saying the economy is improving, while roughly half say we are in a recession.
Renters were more optimistic, but only slightly, with 57 percent believing the economy is improving. 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 Dr. Yun.
“However,” he added, “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.”
The dream of homeownership is alive
Despite the spit over the economy’s performance, roughly 85 percent of all households believe that homeownership is a good financial decision and part of their personal American Dream, and when asked if they believe this strongly or moderately, 76 percent who believe it’s a good decision feel strongly about it.
The appeals of homeownership include a place to raise a family (36 percent), owning their own place (26 percent) and a nest egg for retirement (14 percent). The majority believe it’s a good time to buy, but two-thirds believe it would be difficult to obtain a mortgage. That said, only five percent of renters have attempted to obtain a mortgage and failed, debunking the common talking point that the economy has kept rejected borrowers in a rental situation.
Financial outlook on the rise
With 89 percent saying home prices in their area have risen or remained the same, 91 percent believe this trend will continue.
The new HOME survey also calculates a monthly Personal Financial Outlook Index measured by household type, age, income and type of location. Since tracking began in March, the index representing all households has slowly trended upward to its highest current reading in December – reflecting stronger confidence that respondents’ financial situation will be better in six months. Currently, renters, younger households and those living in urban areas are more optimistic about their future financial situation.
“Young adults, who make up the majority of all renter households, are typically more optimistic about their future,” adds Dr. Yun. “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 onto the market and needed improvements in affordability conditions,” Dr. Yun concludes.