Despite some assertions that younger consumers are more interested in rental properties rather than a new home purchase, recent data from Fannie Mae showed a different trend.
According to the National Housing Survey Topic Analysis regarding young renters, in the third quarter of 2013, 59 percent of respondents who were young renters said they want to own a home because ownership provides a better sense of security, privacy and more control over where they live. Although this is a decline from the third quarter of 2012, when 62 percent of young renters had the same sentiment, the preference for homeownership still trumps renting. Only 41 percent of these respondents said renting makes more sense because it is a more flexible living arrangement with less stress.
In regard to respondents who were already homeowners, 86 percent of young owners said they preferred to purchase a property in the third quarter of 2013, an increase from 83 percent the year prior. Additionally, only 13 percent said renting makes more sense.
Why some young renters shy away from ownership:
Potential first-time home buyers have a variety of reasons for preferring to stick with a rental property. Flexibility is often cited, as the changing job market has encouraged younger consumers to move where the jobs exists. Others in the group are simply building their finances before they transition to homeownership.
The last point is particularly relevant, as Fannie Mae noted that many respondents said although young renters are likely to strive toward buying a home, many are fearful of financial constraints. Specifically, the ability to get a low cost mortgage is among the chief concerns, as young renters have been getting more pessimistic in this regard compared to their counterparts in the young owners group.
Additionally, they have seen down payment requirements, credit scores and rising student debt as major obstacles. Given the factors working against them, many potential first-time buyers do not believe they are financially ready to own a home.
Homeownership is still in the cards:
While young renters have been realistic about their finances, many expect that they will be able to purchase a home in the future. Many told Fannie Mae that they even plan to buy a property for their next move.
There are real challenges to transitioning from renting to owning in today's economy, but there are ways for aspiring homeowners to achieve their dream. Fannie Mae said that one of the key ways for renters to get closer to homeownership is to further educate themselves about the home buying process and how they can qualify for better financing. One suggestion was for renters to look into alternative methods for transitioning, such as a rent-to-own lease for a rental home.
For more information feel free to contact Shaun Meller, Senior Vice President, The Federal Savings Bank
For consultations on buying your first home in Manhattan, feel free to contact Ross Ellis, Halstead Property
Tuesday, May 27, 2014