Despite weakening optimism from non-homeowners at the end of last year that now is a good time to buy, an overwhelming majority said they do want to own a home in the future and believe homeownership is part of their American Dream.
That is according to new consumer survey data from the National Association of Realtors®, which additionally found that non-homeowners’ lifestyle changes and improvements in their financial situation outweigh seeing their rent increase as the main motivators for deciding to buy a home.
NAR’s Aspiring Home Buyers Profile analyzed 2017 quarterly consumer insights from its Housing Opportunities and Market Experience (HOME) survey 1 to capture the housing expectations and sentiment of non-homeowners – both renters and those living with a family member.
When asked for the primary reason non-homeowners currently do not own, an increasing share of them over the past year said it was because they are unable to afford it. Over half of non-owners indicated they could not afford to buy a home each quarter, with the share feeling this way reaching its highest in the last three months of the year (56 percent).
The swift price growth and painfully low supply levels in much of the country in 2017 also appeared to have dealt a blow to the confidence among non-owners that now is a good time to buy. After reaching a high of 62 percent in the third quarter, the share of non-owners who believed now is a good time to buy slipped to 58 percent at the end of the year.
Lawrence Yun, NAR chief economist, says severe inventory shortages are making homebuying less affordable and are dimming optimism among many renters who desire to be homeowners. “A tug-of-war continues to take place in many markets throughout the country, where consistently solid job creation is fueling demand, but the lack of supply is creating affordability constraints that are ultimately pulling aspiring buyers further away from owning,” he said. “These extremely frustrating conditions continue to be most apparent at the lower end of the market, which is why the overall share of first-time buyers remains well below where it should be given the strength of the job market and economy.”
Even with the dip in morale about buying over the past year, respondents’ views about homeownership are still overwhelmingly positive. Roughly three-quarters of non-owners each quarter said that they eventually want to own a home and also believe that owning a home is part of their American Dream.
Shifts in lifestyle, finances exceed rent hikes as deciding factor to buy
As for the main reasons non-owners would buy a home in the future, a change in lifestyle such as getting married, starting a family or retiring was the top choice (24 to 32 percent each quarter), followed by an improvement in their financial situation (26 to 30 percent each quarter) and the desire to settle down in one location (12 to 16 percent each quarter).
According to the survey, roughly half of current renters expect their rent to increase this year (51 percent). If in fact their rent does increase, most indicated that they would resign their lease (42 percent) or move to a cheaper rental (25 percent). Only 15 percent of renters said they would consider purchasing a home.
“Housing demand in 2018 will be fueled by more millennials finally deciding to marry and have kids and the expectations that solid job growth and the strengthening economy will push incomes higher,” said Yun. “However, with prices and mortgage rates also expected to increase, affordability pressures will persist. That is why it is critical for much of the country to start seeing a significant hike in new and existing housing supply. Otherwise, many would-be first-time buyers will be forced to continue renting and not reach their dream of being a homeowner.”