Renters Want to be Owners (Fannie Mae Research)

Fannie Mae’s Sarah Shahdad (Analyst, Economic and Strategic Research) provides a captivating headline and compelling questions:

Renters: Satisfied but Reaching for Homeownership (June 6, 2013)

  1. Do renters, particularly those in the younger generation, still aspire to become homeowners?
  2. If so, when, if ever, do they expect to achieve this goal?

Following are some key results from Fannie Mae’s study, which included:

  • 3,004 total respondents
    • 1,954 owners (632 without a mortgage)
    • 990 renters (500 prefer to own for both financial and lifestyle reasons)
    • 60 boarders (live with someone else and do not pay for housing)
  • Data collected from July 5, 2012 – September 22, 2012
  • 25% of all households were cell-phone only households

Click here for the National Housing Survey full topical analysis survey results presentation (PDF).

81% of Renters are Satisfied, but Owners are More Satisfied

A large majority of renters are happy with their renting experience and are slightly more pleased since the 2003 study:

  • 34% Very Positive (31% in 2003)
  • 47% Somewhat Positive (50% in 2003)

Homeownership more satisfying than Renting

  • Twice as many homeowners have a Very Positive experience.
  • Owners are 14% more likely to have a Positive housing experience (95% owners vs 81% renters).

9 out of 10 Renters would Prefer to Eventually be Homeowners; Only 3% Expect to within the Next 12 Months

  • 90% of renters would prefer to buy a home in the future.
  • Of this 90%:
    • 42% in 5+ years
    • 30% in 3-5 years
    • 18% in 1-2 years
    • 5% undetermined
    • 3% within 1 year
    • 3% never

When Renters expect to buy a home

Renters Age 18-34 are Pursuing Homeownership more than Older Renters

Per the study’s categorization, young renters are ages 18-34. 50% of all renters from the study’s selected sample were in this age range.

57% of young renters “prefer owning a home for both lifestyle and financial reasons”, 30% with mixed preference.

Younger Renters Prefer Owning More than Older Renters

  • Younger renters of those preferring to eventually own (51% above) are 88% more likely to have their primary reason for renting as preparing themselves financially for the purchase of a future home.

Younger Renters Saving Up for Home Purchase

Lack of Financial Well-Being is the Most Significant Pre-Purchase and Mortgage Qualification Concern

50% of all renters from the study’s sample were employed full-time, 17% part-time, 18% unemployed, 12% retired.

55% of single-family home (SFR) renters are employed full-time, 45% of apartment renters.

  • 65% of SFR renters make less than $50,000 per year, 18% less than $100,000, 7% $100,000+
  • 72% of apartment renters make less than $50,000 per year, 16% less than $100,000, 6% $100,000+

72% of renters who prefer to eventually own make less than $50,000 per year, 17% under $100,000, 6% $100,000+, 6% unreported.

  • 14% less than $10,000 income
  • 11% less than $15,000
  • 16% less than $25,000
  • 16% less than $35,000
  • 15% less than $50,000

Of the renters who prefer to eventually own:

  • 67% have less than $10,000 in assets (31% all owners)
  • 64% didn’t feel they had sufficient savings (49% owners)
  • 65% thought it would be difficult to qualify for a mortgage (43% owners)
  • 19% have outstanding credit card debt (27% owners)
  • 36% are stressed about paying off debt (23% owners)
  • 15% have had their income decrease significantly (17% owners)

30% of all renters say the cost of renting is greater than what they had expected, 21% say less.

What does this Mean for You?

This thorough study has implications for several groups of people:

Renters / Tenants

Qualifying for a home mortgage is VERY possible! You might be surprised by how much house you can afford, especially when rates are lower.

If you have a credit score in the 600’s or better (or don’t know your score), apply with a reputable mortgage lender today, even if you’re not planning to purchase for another year or two.

Your lender will help you identify anything on your credit that you need to take care of now to prepare for purchasing. You can also benefit from having more relevant, actionable information to make informed purchase decisions.

Landlords / Investors

3 out of 4 (75%) of renters are NOT expecting to purchase a home of their own within the next 2 years.

A long-term tenant is very valuable, and all people prefer an enjoyable housing experience.

Also recognize the opportunity to sell the house they’re renting, whether via traditional mortgage or seller financing.

Real Estate Professionals

This study benefits REALTORS® and mortgage lenders by providing relevant information about the demographics, situations, and long-term goals of SFR and apartment renters.

When considering your marketing efforts toward renters, understand that only 3% of renters preferring to purchase are expecting to purchase within the next 12 months. Hopefully that number will increase as the economy and consumer education improves over time.

The study does not provide information on how long each tenant stays at their rental residence, which would provide more definitive information when considering a 1-2 year (long-term) marketing effort.

Sellers / Homeowners

When selling your home, understand that yours may be someone’s first home.

Make it easy for buyers with mortgages to pick your house by fixing things that are broken.

Most first-time homebuyers (current renters) haven’t had to make repairs before, and most mortgage financing requires the home to be at a certain level of “good condition”.

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