Most renters want to own a home
Just about everyone who's been in the market for a home has addressed the age-old question of whether it's better to rent or buy. A family's circumstances often tell the tale of which is the better bet, but generally speaking, buying beats renting, especially from a dollars-and-cents perspective.
Even today, when a dearth of supply and a glut of demand has caused asking values to increase, most renters still want to own a home, so says a recently released poll. According to new findings from the National Association of Realtors, approximately 75 percent of "non-owners" say they have every intention of buying a house at some point in the future.
The homeownership rate has gone up and down over the years and is still below the all-time high of 69 percent in 2004, according to data compiled by Trading Economics. Currently, about 64 percent of Americans own a home, based on the most recent quarterly figures available from the U.S. Census Bureau.
Cost, limited supply leaving some renters in limbo
If around three-quarters of the country seeks to purchase a house and apply for a mortgage, why isn't the homeownership rate higher? It's largely because of the economics of it. On average, for the whole year, just over half of respondents in the NAR survey said they couldn't afford to buy a home, slightly lower than the 56 percent who indicated as much during the fourth quarter of 2017 alone.
Driving the price increases are the relatively few options would-be buyers have to choose from, noted NAR chief Lawrence Yun.
"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," Yun said.
How problematic of an issue dry real estate markets are is a function of where you happen to be looking, as some regions have more properties in listings than others. From a national perspective, however, choices are slim. In January, total housing inventory actually increased to 1.52 million, based on existing-home sales numbers from the NAR. But even with an increase of 4 percent from this past December, inventory is still down 9.5 percent from January of last year.
"These extremely frustrating conditions continue to be most apparent at the lower end of the market," Yun said, "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."
Renters feeling the pinch
But the rental situation isn't much more accommodating. To the contrary, 51 percent of the participants in the NAR survey said they anticipate paying more for rent in 2018 than they did in 2017.
As it stands, the average worker today has to earn more than $21 per hour to afford a two-bedroom apartment, according to the National Low Income Housing Coalition. Given that renters currently make an average of $16.38 per hour, this means that many renters are spending more than 30 percent of their income on rent. Because of these affordability pressures, it's time for developers to kick things into high gear.
Speaking of affordability, many renters or would-be buyers operate under the belief that they can't afford a down payment, under the assumption that they have to put down 20 percent of the property's value up front. Based on a separate poll conducted by the National Association of Realtors, 37 percent of millennials believe a 20 percent down payment is required. Not only is this inaccurate, but it's also far above what the average actually is (5 percent).
Regardless of what the supply situation looks like, renters are looking to buy, primarily because they're running out of room. In a Realtor.com poll, nearly 93 percent of respondents said they wanted at least two bathrooms in their future home.
With the inventory situation showing some improvement, prospective buyers should be able to get exactly what they're looking for in the not-too-distant future.