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.

Homes still affordable - really affordable

Homes still affordable - really affordable

The bright side of the housing bust: Homebuying has not been this affordable in a generation.NEW YORK

(CNNMoney.com) -- Homes continue to be more affordable than they have been in nearly two decades. The typical American family, making the nation's median income of $64,000 a year, could afford to buy 72.3% of all homes sold in the United States during the second quarter, according a quarterly report from the National Association of Home Builders (NAHB) and Wells Fargo (WFC, Fortune 500). That's off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable. "The increase in affordability -- along with the $8,000 federal tax credit for home buyers -- is stimulating demand, particularly among young, first-time buyers," said NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla., in a prepared statement. The NAHB judges a home to be affordable if a family making the metro area's median income could devote no more than 28% of their take-home pay toward housing costs. The vast improvement this year is due to plunging prices and rock-bottom interest rates. The average U.S. home price has dropped more than 32% from its peak, which was set during the summer of 2006, according to the S&P/Case-Shiller Home Price index. And, for most of the three months mortgage rates were historically low, under 5% for a 30-year fixed-rate loan. Long suffering sellers The improved affordability comes, of course, at the expense of sellers. Real estate Web site Zillow reported that more than 30% of all homes sold during the three months ended June 30 went for less than what the sellers originally paid. The longer they owned the home, the more likely they were to profit from the resale, but virtually anyone who bought within the past five years and sold during the quarter lost money on the deal, according to Stan Humphries, Zillow's vice president in charge of data and analytics. Foreclosure factor The heartbreak among home sellers is compounded by the foreclosure problem. Many of the homes on the market got there because families lost their homes to foreclosure. Part of the reason that home prices have become so reasonable is the volume of REOs -- real estate speak for homes repossessed by banks -- has spiked. There were more than 87,000 repossessions in July, about triple the number of July 2007. Foreclosed homes are often listed and sold at steep discounts to produce quick sales, according to Brad Geisen, founder of Foreclosure.com, which markets such properties. "The big banks are finally pricing their properties to what people will pay for them," he said. "Foreclosure inventory is now selling at about the same rate it's coming in." Most affordable cities The older, industrial Midwest cities generally offer the best bargains. Indianapolis has led the NAHB's Housing Opportunity Index for 16 straight quarters. Nearly 95% of all homes sold there were affordable to those earning the area's median income of $68,100. Other leaders were the Youngstown, Ohio, metro area, Detroit, Dayton, Ohio, and Grand Rapids, Mich. The least affordable large metro areas were New York, where only 21% of homes sold were affordable, Honolulu, San Francisco,Los Angeles and Santa Ana, Calif. By Les Christie, CNNMoney.com staff writer