Homeownership may be off the table or significantly delayed for a huge segment of the current rental market. According to a new study from Yardi’s Rent Café, 43% of renters report that they will not be able to achieve homeownership for five years or longer due to the economic impact from the pandemic. 21% of respondents in the survey said that they could not buy a home for at least five years and 23% of respondents said they would never be able to purchase a home.
“The reason why most renters don’t plan on becoming homeowners in the near future is financial worry,” Florentina Sarac of Rent Café tells GlobeSt.com. “With home prices already high, they assume that the current pandemic won’t have a positive effect on the housing market – on the contrary. Despite a desire to own a home, renters are shying away from doing so as they not only can’t find a home priced within their budget, but they also have to take into consideration the unpredictability of current events.”
When looking at individual demographics, boomers overwhelmingly said that they would not purchase a home again with 50% responding “never” and 8% responding “more than five years.” On the other hand, 27% of millennials and 14% of Gen-Z responded “never” to the question. “While more and more Boomers are shifting towards renting given the flexibility and affordability that comes with it, younger generations like millennials are finally starting to give homeownership a chance as they begin to settle down and start families,” says Sarac. “Gen Z-ers, on the other hand, are still too young to have the necessary financial stability to become homeowners although they are enthusiastic about it. The influence, however, might come from their gen-X parents, who have been through several economic crisis resulting in many of them wanting and failing to become homeowners in 2008 and now we’re witnessing a replay of that due to coronavirus. As a result, 25% of them are no longer hopeful about becoming homeowners.”
While the pandemic has certainly delayed homeownership plans for some, 56% of total respondents said that they plan to buy a home within the next five years. “It was unexpected to see that those still willing to become homeowners want to buy as soon as possible,” says Sarac. “However, it does seem like the most sensible decision for aspiring homeowners that already have the financial means to try and speed up the process. What many renters want to do is actually take advantage of a period when mortgage rates are at an all-time low. Since we can’t possibly predict the way home prices are going to change in the future, it’s best to make a move now.”
Future homeownership trends are one of the great current unknowns, and a lot depends on the recovery and the speed of recovery. “It all depends on how long this pandemic is going to last, but it would be safe to say that the housing market is bound to be affected by this, one way or another,” says Sarac. “Given the uncertain times we’re going through, most renters might be extra cautious when it comes to taking big decisions such as buying a house.”
The 2008 recession could be a guide for home buying activity during the recession. “We could witness a period similar to the aftermath of the 2008 crisis with Americans choosing the housing option that best gives them financial stability until they have the certainty that it’s okay to undertake bigger financial transactions,” says Sarac.
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