Attitudes and preferences about housing may be changing, according to analysis from Trepp and data from the Federal Reserve Board of Governors.
Part of the apparent shift may be due to a demand-supply challenge. There aren’t enough houses being built to satisfy everyone, a well-known dynamic. But there are also indications that consumers, particularly younger ones, are shifting some of their preferences and not only just because they lack funds.
Age, far over geographic region, showed wide dispersion in whether people rented or owned homes. Across the full sample, 64% of people owned their home, 27% rented, and 9% did neither. That latter category could include people who were homeless or lived with friends or family. It’s unclear whether people who said neither may also have qualified if they were students living on campus.
Of those who were over 65 in age, 85% owned their home, 13% rented, and 3% did neither. Move the age range to under 35 and 34% own their home, 44% rent, and 22% do neither. In other words, a fifth of those under 35 don’t seem financially responsible for their housing.
Four major regions varied by the own/rent/neither breakdown. The West had the smallest ownership at 61%, 31% wanted to rent, and 8% said neither. The second lowest ownership rate was 62% in the Northeast, with 29% renting and 9% saying neither. The South had 65% ownership, with 25% renting, and 10% did neither. Then the Midwest had 68% ownership, 23% renters, and 8% did neither.
Another set of data looked into renters: consumers who were trying to buy and those who considered themselves long-term renters. There are three sets of figures for these. One is the percentage of the whole population that is trying to purchase, a second is the percentage of the whole population that is a long-term rental, and then the percentage of renters who are trying to buy.
In the full sample, 8% were making efforts to purchase, 19% were long-term renters, and of those renting, 30% were trying to buy. For those under 35, 16% were trying to buy, 28% were long-term renters, and 36% of renters were trying to purchase. Over 65, it was 1%, 12% and 10%, respectively.
The geographic breakdown was 7% in the Midwest, trying to buy, 17% long-term renters, and 28% of renters looking to buy. Then comes the Northeast with 8% who are trying to purchase, 21% long-term renters, and 28% of tenants were looking to buy. In the South, 8% are trying to buy, 18% are long-term renters, and 30% of renters are trying to buy. Finally, there is the Midwest with 7% trying to purchase, 17% long-term renters, and 28% of renters trying to buy.
Then comes the motivations to rent, whether cost (cheaper to rent); financing (can’t qualify for financing, afford a down payment, or afford mortgage payments); financial risk (renting has less financial risk); or preference (prefer renting for convenience and flexibility or having a general preference for renting). The percentages won’t add to zero because people have multiple reasons.
Of all renters, 42% pointed to cost, 73% to financing (40% mentioning qualification, 65% down payment, and 48% mortgage payments); 44% saying financial risk, and 62% citing preference.
Of those trying to buy, 34% said cost; 77% pointed to financing (38% listed qualification, 67% down payment, and 44% mortgage payments); 35% said financial risk; and 47% preference.
Finally, out of long-term renters, 46% said cost; 71%, financing (41% qualification, 65% down payment, 49% mortgage payments); 47% financial risk; and 69% preference.
Some of the implications include that renters more motivated by preferences tend to have high and sustained demand for rental units. Renters less driven by preferences are more likely to shift toward homeownership. Places with high-cost barriers — the Northeast and West — will probably see high demand for new home supply