The American Dream still includes buying real estate as a means to financial prosperity, with 75% of Americans polled say that owning their own home is a priority and 91% – a near consensus – reporting that they’d like to own a home at least once in their lifetime.
However, our current homeownership rate is surprisingly low at 64.2% as of Q1 2018 – some of the lowest levels in thirty years despite high demand and great mortgage interest rates.
But there very well could be a new wave of homebuyers coming soon, balancing out the scales of our seller’s markets and increasing the U.S.’s paltry homeownership rates now.
In fact, about one-third of Americans who don’t now own homes plan to buy one within the next five years.
Of those first-time homebuyers, the younger generations, led by Millennials at 49%, lead the charge for a desire to own soon. In fact, 82% of Millennials (compared to 75% overall) say that owning a home is a priority.
They’re followed by 35% of Generation X’ers and 17% of Baby Boomers who plan on buying within the next 60 months.
According to this survey, 15% of Americans polled have already purchased a home within the past five years.
Even when they would love to buy a home, most renters (88%) have serious concerns about buying, for one reason or another.
Of course, the number one reason why Americans still want to buy is that they understand owning a home is a great investment, with 64% of soon-to-be buyers say that the financial benefits to owning are the main factor. In fact, more than half of all those surveyed agree with the statement “I would rather have a home I own appreciate in value than have more money in retirement savings.”
It’s understandable that the economy will affect the motivations and behaviors of home buyers, but what about the political climate?
In fact, a Harris Poll of 2,165 U.S. adults asked the question, “If you were in the market to buy a home, would the current economy and political landscape make you more or less likely to buy?”
35% of respondents said that they were more likely to buy because of the current economy and political climate, and an equal share of 35% said that they were less likely to buy because of the same reasons, and• 30% were unsure.
Considering that they want to become homeowners, what do today’s potential buyers feel about their ability to purchase a home, especially compared to one year ago?
It seems home buyer sentiment is split right down the middle, with 50% of Americans neither better nor worse about their prospects for buying property this year compared to last.
But 28% do feel better about owning a home (compared to just one year ago.) Of those home ownership optimists:
45% say they have more savings for a down payment, and41% are making more monthly income so they can qualify and afford a house easier.
Finally, almost a quarter of all Americans who don’t now own a home (23%) feel like they are further away from that goal than last year, with 48% having less savings, and 57% earning less income than the year before.
Currently, 35% of Americans surveyed are renting their primary residence, but only less than one in five (17%) say they prefer to rent.
Of that small minority that prefer renting over owning, A third of them (33%) say it’s because renting is more affordable to them.
(On a side note, that’s interesting because 30% of those who DO plan on buying in the next five years say that one of the main motivations is that owning is more affordable than renting!)
Others prefer renting because of the freedom it gives them to move if they wish, and the fact that they don’t have to handle maintenance and upkeep when they rent.
These home maintenance concerns seem to present a significant worry for would-be homebuyers who are renting instead. In fact, 58% of current renters say that the maintenance on a home if they owned it is a concern.
According to reports, the average cost to maintain and home, provide preventive maintenance, and fix what breaks comes to about 1-2% of the home’s value every year, or about $5,000 for a median-priced ($254,000) home in the U.S.
However, it may be lower, based on the condition of the home, age, and area of the country. There are also ways to protect yourself from unexpected costs, such as home warranties and roof certifications at the time of purchase, and most home maintenance expenses may even be tax deductible, deferring the true cost.
But the majority of those who prefer renting may truthfully plain old believe that they can’t buy. For instance, 56% of pro-renters admit that they don’t have the money to buy (or so they think), 222% say their credit isn’t good enough to buy, and only 24% say they don’t want the long-term financial commitment. (Of course, we understand that renting is a lifetime financial commitment – with no upside!)
Furthermore, there may be a misconception about the funds needed to buy a home that’s preventing some renters from buying. For instance, 44% of Americans still think that you need a down payment of 20% of the home’s purchase price in order to buy, and they vastly overestimate what credit score is needed.
However, there are plenty of great loans, like those guaranteed by FHA, the Federal Housing Authority, that only requires a 3.5% down payment. There are even some lending products and down payment assistance programs that allow new homebuyers to qualify and get their keys with no money down!
Likewise, FHA loans can accommodate buyers with less-than-perfect credit.
With better education, familiarity with the process, and assistance from mortgage lenders, there are millions of potential new homebuyers out there who are ready to buy soon!
A Better "Way" to Real Estate 