Survey: More Renters Want to Become Homeowners

Article From HouseLogic.com

By: Dona DeZube
Published: August 05, 2013

Homeownership as a priority is on the upswing. And a look back shows perceptions about owning weren't as negative during the recession as the media suggested.

Americans have favored buying over renting, even during the recent Great Recession, and this year is no different. The 2013 National Housing Pulse Survey, by the NATIONAL ASSOCIATION OF REALTORS®, found Americans overwhelmingly believe owning a home is a good financial decision, and a majority of renters say homeownership is one of their highest priorities for the future.

During the recession, much media coverage of homeownership focused on the idea that lots of people thought renting was much smarter than buying. But that wasn't necessarily the case as a look back shows.

The decline in home prices and turmoil in the housing markets did influence consumers' perception of housing as a sound investment -- but not by nearly as much as the media made it appear.

From 2007 to 2011, based on earlier Pulse surveys, the share of people who thought buying a home was a good financial decision dropped from about 85% to 73% and the share of people who were "not so strongly" positive grew. By 2013, we're back to 80% thinking homeownership is a sound financial decision.

You can interpret that dip two ways. Some would say homeowners were resilient as prices declined. Others would say the recession was a wake up call for investors who viewed the real estate market as a short-term investment.

Regardless of which way you see it, most of us have returned to the much more realistic viewpoint that real estate is a solid, if long-term, investment.

This year's Home Pulse survey also found:

          •Eight in 10 Americans think buying a home is a good financial decision.

          •68% believe now is a good time to buy a home.

          •36% of renters are now thinking about purchasing a home, up from 25% last year.

          •The proportion of renters who say they prefer to rent dropped from 31% to 25%.

          •Half of renters say that eventually owning a home is one of their highest personal priorities, up to 51% from 42%.

Those renters should be in a good position to buy given that home prices are pretty affordable (unless you're a bus driver in San Francisco). Rising interest rates could come into play, but anything around 6% looks good compared with the double-digit interest rates of the 1980s.

Attitudes toward the housing market have also improved over the years. Nearly four in 10 Americans (38%) said their local market was more active this year, compared with 51% of people who reported a slowdown in local activity last year.

There is also less concern than in the past about the drop in home values; almost half (49%) said housing prices in their area are more expensive than a year ago.

Some Common Questions About Buying a Home

If a person is a first time buyer, what are the best steps to take to become a home owner?
The absolute first step to take is to talk with a mortgage person. There are a few reasons for this. First of all, you want to know where you stand financially in regards to qualifying for a mortgage. You will find out how much of a mortgage you qualify for, and how much you can really afford. Many times a bank will qualify you for more than you are comfortable paying each month. We do not want you to be what we call "house poor", meaning, yes, you now have a home, but you don't have enough money left over after paying the mortgage to enjoy life.

The second reason is that if your credit score is a little low, a good mortgage person will explain how you can improve your score... sometimes dramatically. It does take at least a couple of months for any changes you make to trickle down to your credit score. But it could mean paying a lower interest rate, and therefore have a lower mortgage payment, so the wait may well be worth it.

The last reason is that you cannot make an offer without a mortgage pre-approval. No seller will consider your offer if you can't prove you can pay for it. Also, you don't want to waste your time looking at $300,000 homes if you would only qualify for a $250,000 one.

Is there a different pre-qualification process when you are considering a foreclosed home?
No, the qualification is the same, but you may want to look into an FHA 203K rehab loan. This is a specialized mortgage that gives you extra money above what you are paying for the property that you can use for repairs and upgrades. Many foreclosed properties will need work.

What percentage of the purchase price is usually required?
With an FHA mortgage the minimum down payment is 3 1/2% of the purchase price. You will also need around 2% (roughly depending on the mortgage) for closing costs, but we can almost always get the seller to pay for most of that. The are other loans available through Mass Housing and the VA that have low or even no down payment requirements. Again, it depends on your particular financial situation. There are also matching down payment programs in many cities that I can help you with.

Would all these things apply to a short sale as well?
Everything here also applies to a short sale. The major difference is the length of time needed to close. With a regular home sale, including bank owned properties, the closing is typically 4-7 weeks after the offer is accepted. With a short sale you are looking at a minimum of 8 weeks, with 3 to 4 months more common, and 4 plus months not uncommonly seen. The saving you can make is usually worth the wait.

If you have any questions regarding real estate or financing, please contact Jim Armstrong