NEW YORK – Sept. 10, 2014 – Many households, particularly among younger professionals, prefer to keep renting even though monthly rental costs continue to surge. What’s driving the sluggish transition to homeownership?
A survey of 344 renters from the New York Federal Reserve’s Survey of Consumer Expectations finds that many renters have the desire to own a home, but access to credit remains a big hurdle that prevents them from buying. About two-thirds of renters surveyed said they thought it would be somewhat or very difficult for them to get a mortgage; only about 5 percent thought it would be easy.
The following are the top reasons renters gave for postponing a decision to buy a home:
- Not enough money saved or too much debt (55.7 percent)
- Don’t make enough money (52.7 percent)
- Credit isn’t good enough (41.4 percent)
- Don’t want the upkeep that comes with homeownership (28.6 percent)
- Don’t want to be tied down to certain area (24.1 percent)
- Renting is more affordable than buying (23.6 percent)
- Don’t want to tie money up in a house (18.7 percent)
We see that the main reasons preventing renters from becoming owners are weak balance sheets (low savings or high debt), low income and lack of access to credit, economists with the Federal Reserve Bank of New York said in the report. Some cite inherent advantages of being a renter (such as low upkeep and more flexibility), but notably, few say that they do not want to own because they are concerned that house prices might fall.
About 60 percent of respondents said buying property in their ZIP code is a good investment; only 12 percent thought of it as a bad investment.
Current renters are as bullish on housing as current owners – or perhaps even slightly more so, the report notes. This optimism is also reflected in expectations about future house prices.
Renters have slightly higher expectations for home-price growth than owners. Renters expect home prices in their ZIP code to rise by 5.4 percent over the next year; homeowners expect a 3.8 percent rise.
These findings suggest that with a stronger economy and eased credit standards, flows into homeownership would pick up, the authors note. However, one caveat is that many potential buyers with relatively low credit scores – 35 percent of renters in our sample think that their credit score is below 680 – might now be discouraged.
If discouraged, these renters believe they would not be granted credit, so they may not apply for a mortgage after credit standards ease.
Information and article from – http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=313171.