More people want to purchase a home this year, but will they be able to?
Source: By Julia Falcon | Housing Wire
Mortgage rates are low, applications are up and an increase of Americans say they plan on purchasing a home.
In fact, 84% of Americans said buying a home is a priority to them, up significantly from 2018’s 75%, according to the latest NerdWallet Home Buyer Report.
The survey estimates that nearly 100 million Americans plan on purchasing a home in the next five years, while about 27 million are planning to buy in the next 12 months.
More Americans are seeing the brighter side of things, as 44% said they feel better about their ability to buy a home this year.
“There is colossal pent-up demand for homeownership, both among young people who are ready to pair up and start families, and those who see owning a home as the next step in adulthood,” says Holden Lewis, NerdWallet home and mortgage expert.
“These folks feel optimistic, but are aware that there’s a lot they don’t know,” Lewis said. “They’re looking for guidance so they can feel confident about finding a good home they can afford, and qualifying for a mortgage. According to estimates, roughly six million new and existing homes will be sold in 2020, and well-informed buyers will have the edge.”
Homebuying is a priority for 88% of Millennials, while 55% of Americans said homebuying is a priority for them because it’s a good investment.
Although the younger generations see the importance of home buying, many still see remorse.
There was 29% of homebuyers who said they no longer felt financially secure after purchasing their current home. In fact, 54% of Gen Xers and 42% of Millennial homeowners said they felt this way, compared to 31% of Gen X and 16% of Baby Boomer homeowners.
What’s making home shoppers put off homebuying? A lower income was the biggest obstacle, among 42% non-homeowners; 37% said they didn’t have enough for a downpayment; and lack of available homes was the biggest obstacle for homeowners that wanted to move.
“While affordability is tricky to measure, the homeownership rate isn’t,” Lewis said. “When homes are less affordable, you expect the homeownership rate to go down. And it has gone down for people in their 30s, considered the prime years for first-time homebuying.”
The shortage of starter homes and slow income growth also impact the housing market, turning home shoppers away from the market.
Home value growth is stagnant, housing inventory is few and far between, and starter homes remain occupied. These shoppers are noticing, too.
And in January, the active listings of homes for sale fell 11.4% year over year. This marks the biggest drop of homes for sale since March 2013 and the sixth consecutive month of declines, according to Redfin.
Now, 75% of Americans believe it’s more difficult to afford the purchase of a first-time home than it was 25 years ago.
They might be right: the homeownership rate among 25- to 39-year-olds fell from 54% to 46% from 2000 to 2018, the report said.