Posted on 09/14/2014 10:35:20 AM PDT by 2ndDivisionVet
We’ve all heard that millenials are the key to the housing recovery and that home prices are set to skyrocket just as soon as all the people renting or living in family homes (read: basements) get out, get married, get employed, and settle down in their new homes. However, for some reason, the estimates for when all this will happen just keep moving farther and farther out. In an effort to determine just what is delaying renters from becoming homeowners, the New York Federal Reserve conducted a Survey of Consumer Expectations to address the issue. The study found that while most renters have a “desire to own,” a number of factors are preventing them from buying. Some of these factors are very real hurdles to homeownership, while others are literally all in the renters’ heads.
The biggest hurdle to buying a home for most renters is a very large, very real one. More than half (55.7 percent) say that they simply do not have enough money saved or that they are paying too much money out toward debts. 52.7 percent report that they do not make enough money to purchase a home, and 41.4 percent report that their credit is not good enough. Interestingly enough, however, many renters do not actually do any research before coming to these conclusions. About two-thirds of renters reported that they simply think it will be “somewhat or very difficult” for them to get a mortgage versus actually knowing this to be true[1]. Furthermore, many renters do not even check their credit to determine whether they have a viable score for buying but simply assume that they do not; more than a third (35 percent) “think that their credit score is below 680” rather than actually knowing this to be true. “They are convinced that they would not be granted credit and thus may fail to apply for a mortgage even after an easing in standards,” explained Fed researchers in their report. The researchers also added a caveat regarding lowering borrowing standards. “Relaxing credit standards may…have undesirable consequences down the road since borrowers with lower credit scores are at higher risk of default,” they wrote [2].
WHAT WE THINK: While we want to believe what so many rose-colored-glasses-wearing analysts are selling (namely that we can get back to a serious real estate boom before 2020), reports like this indicate that we are simply living in a new era for real estate in which appreciation is not fast and not guaranteed, in large part because an increasingly large portion of the population is opting out of homeownership and feeling okay with that decision. While the NY Fed did determine that most renters think buying a house would be a good investment, those renters’ perspectives on their own personal homeownership experience do not indicate that they will actually buy. As long as they keep renting, the face of the housing market is going to continue to change and the dream will be less and less universal because these individuals are going to raise families and socialize among friends who do not necessarily think homeownership is crucial to happiness, productivity, or professional success.
Do you rent or own? Wish you did something differently?
Hey that’s great. I’m not saying its a bad move. Just keep in mind it doesn’t always work out that way. What I am saying is that we are not being truthful to ourselves when we talk about home ownership, and that is the danger. We must get rid of perpetual property taxes and mandatory HOAs if we are to maintain the American dream.
The only point that I am making is as you get older, the cost of living may increase more than your retirement savings. The rental on your lake view property will be more expensive, and you may have to move. No one is talking about the cost of hiring a moving company to move, and that can be considerable, especially if you are older and have less ability to pay or move furniture by yourself.. When I own, my cost are fixed except for property tax, which would have to be paid in a rent if I rented. If you rent, you also should have a renters insurance policy in lieu of homeowners insurance.
Owning a home is not for everyone, but I see what is happening with my sibling, as he should have bought years ago and he would not be facing the uncertainty that he is now experiencing.
I’m 67 and been around the block more than a few times.
Wife and I are re brokers. I’ve shown a few people why they should not buy or at least wait awhile.
I bought a modest house, fixed it up real nice, did landscaping etc.
values have dropped about 10% I don’t know why. In coming up with a sell price an agent came over with 3 comps and priced my house below what I will accept. She said banks won’t lend on a house over the comps no matter what you’ve done to your property. That statement just startled me.
We’re about 20 g apart and I’m kinda stumped. It’s the nicest home in the neighborhood and I want my price.
My landlord, a medium sized corporation, doesn’t do those things, for the most part. They leave us alone as long as we pay the rent on time and don’t cause trouble.
That depends on the bi-laws and covenants. Some HOAs are really nothing more than a way to maintain a common area and see that a *few* basics of decorum are maintained. Noise levels and minimal presentable-ness of property.
Read this stuff before buying.
As an after thought, maybe a slightly overbearing HOA would be a little protection when HUD moves some of their Obama constituents so they can learn how to be middle class by watching you folks going to work & mowing your laws. LOL
Never had a landlord do that. My landlord has only been in the building twice this year, once to replace a pipe on a sink that went bad, and once to put in a new stove. They don’t even have a full complement of keys. I know some companies demand constant access, but once I saw those clauses in the lease I said no thanks and stopped looking at any properties form that company.
It’s the nicest home in the neighborhood
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That’s the problem. It’s the nicest in the neighborhood.
It is best to never over improve a home beyond those in the neighborhood. The money invested in the improvements will not be collected when sold.
She’s carefully worked the numbers and as long as she works in the city where she lives, renting will never compare to the way she has it now. Which was her goal from the get go. Not an “investment”. But a method of assuring that she has a fairly fixed housing cost (in the event of serious inflation). The $300+ each month not going into higher rent is going into savings. Savings into which she has calculated the average annual maintenance expenditures. Last year a water heater. This year gutters.
The knowledge that she is highly fixated on financial independence is very reassuring. I will die (much much later hopefully) knowing she can take care of herself.
What is your reasoning on this. My husband and I have owned three residential condos and one business condo. There was never any problem with HOAs.
all the taxes, levees, fees, and other costs, that are tacked on by the municipality
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All of the above is tacked on to the renters bill. There is no escape except to live under a bridge. And....Since businesses pass on their municipal fees in the form of higher prices ( mostly due to our K-12 single-payer and socialist-entitlement schools) even the homeless pay, too!
I agree, taxes are high.
I work in Dallas (can’t afford or want to live there) and rental rates are absurd. I don’t know how people afford it.
I think I’ll take my chances with the taxes. :)
In Manhattan, landlords rarely are on the scene. All work is done by the “super.” In fact, landlords are kind of these hidden entities. I never met one in all my years of renting.
The “American Dream” for today’s millennials is not about home ownership; it is not about getting married and raising children. Their dream is a bucket list of experiences that is not tied to any one city, or even country. Renting is much better suited to someone who may be working in Boston this year and Vancouver next year, then move to China and teach business English before coming back to Los Angeles.
Yes, and despite precautions taken, children happen. And with a child on the way, the incentive to buy a house escalates enormously. And then the carefree life ends.
I don’t know any “youth” today who want a McMansion. Most of the younger people who work for me don’t even want to own a home.
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