From The MReport.com 2/9/16
Although rents continue to rise at a rapid pace, many non-homeowners are still shying away from the real estate market due to down payment and credit score troubles.
Zillow’s Rent Forecast found that rents will flatten in 2016, but will still be unaffordable in most markets. This presents yet another challenge for the aspiring homebuyer on top of rising rates, tightening credit, and flat incomes.
Rent appreciation is expected to flatten over the next 12 months and will slow to an annual rate of 1.1 percent by December 2016. Nationally, the index is forecast to be $1,396 by the end of the year, compared to $1,381 in December 2015.
“In general, paying a mortgage is more affordable than renting, and has been for some time. Unfortunately, many current renters aren’t able to realize the savings that come with homeownership because as home values and rents keep rising, it’s getting increasingly difficult to clear the down payment hurdle,” said Dr. Svenja Gudell, Zillow’s Chief Economist.
A recent telephone survey from Bankrate and Princeton Survey Research Associates International of 2,002 adults found that 45 percent of non-homeowners say their financial situation is preventing them from purchasing a home because they cannot afford a down payment (29 percent) or their credit score is not good enough (16 percent) to obtain a mortgage loan.
The Bankrate report also showed that an additional 35 percent of survey respondents noted that they out aren’t ready to be homeowners yet.
According to the data, 44 percent of millennials don’t want to own a home right now, meaning they enjoy the mobility of renting and intend to settle down later in life.
Bankrate.com’s Mortgage Analyst Crissinda Ponder told MReport that millennials could be counting themselves out of buying right now because “student loan debt is preventing them from saving for a down payment. It could also be that they don’t plan on sticking around the cities in which they currently live. Additionally, millennials are possibly waiting for a major life event, such as starting a family, to push them into homebuying. Our survey shows that 40 percent of non-parents say they just don’t want to own right now, compared with 23 percent of parents.”
“It’s not surprising that a lot of millennials aren’t interested in home ownership yet. Renting allows them more freedom to move,” said Holden Lewis, Bankrate.com’s Senior Mortgage Analyst. “For people in the prime child-rearing years of 30 to 49, it’s more complicated. A lot of them have income and credit issues that might have roots in the recession.”
Bankrate determined that over 4-in-10 middle aged Americans don’t even own a home. Of these non-homeowners, 31 percent said that the down payment is holding them back and 20 percent say that bad credit is the reason.
“The first step renters who are interested in homeownership should take is to get educated,” Ponder said. “Buying a home can be a convoluted process, so it’s important to reach out to a trusted source, such as a nonprofit housing counselor. Also, take the time to talk to a mortgage professional. You don’t have to agree to anything to learn where you currently stand financially as a potential borrower. The more you’re able to contribute as a down payment on a home purchase the better, but you don’t have to put 20 percent down.”
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