The challenges in the housing market have created a noticeable shift in homeownership patterns. In 2010, 66.5% of U.S. Households owned their homes, which is down from 67.2% in 2009. At the end of 2005, the rate of homeownership was 69%. Amy Hoak from www.marketwatch.com wrote a great article on the topic.
So, what is happening to cause this trend?
Oddly, the raw number of homeowners did not change, according to the MarketWatch article. The National Association of Home Builders reports that the total number of homeowners remains at 75 million. What is rising is the percentage of renters. More households have come on the market, but since the number of owners is stable, the additional homes are being occupied by renters.
Even more telling is the demographic that is adding to the pool of renters. Younger people are purchasing homes at a lower rate than they had in the past. The rate among those 55 or older has remained roughly the same.
Mark Sprague, Director of Business Development at Mission Mortgage, often points out in his presentations that he is seeing an attitudinal change among the younger generation. Not only are they willing to wait longer to buy a home, they are getting married later and having kids later – both of which have spurred homebuying in the past. In addition, members of the younger generation are putting more emphasis on living close to where they work and play. In the past, less expensive housing on the periphery of cities were attractive to younger buyers who could purchase a new home for the same or less than a resale closer to downtown. Now, according to Sprague, we are seeing more in this generation opting to wait and simply rent so they can remain close to the heart of the city. In Austin, we have seen this phenomenon clearly.
In addition to these generational differences, many potential buyers have elected to rent out of fear of losing value in their home investment. Others are unsure about the stability of their jobs, causing them to resist purchasing a home until they feel more secure. Tighter lending standards have also limited some potential homeowners from finding financing. But for the right borrowers, lending is still available.
With rental units experiencing extremely high occupancy rates, many are expecting rents to rise. Increased demand allows landlords and rental property owners to raise their rates. With mortgage interest rates still hovering near 5% for a 30-year conventional loan and rental rates and occupancy on the rise, it is actually more affordable to buy than to rent. That probably causes the most confusion when looking at the drop in homeownership percentages.
Mission Mortgage has been following homeownership trends and we recommend anyone who is considering a purchase to act soon. In Austin, median home prices have been increasing as have mortgage rates. We don’t anticipate a drop in either of these, so the longer you wait, the less buying power you will have. If you aren’t sure if homeownership is right for you, you need to consider the whole picture, including the tax benefits to owning over renting. Please contact us at firstname.lastname@example.org if you have any questions or would like a personal consultation. We’d be happy to answer your questions and help you make the right decisions for your situation.
To read the full article from MarketWatch, please click here.