Is a new group of potential homebuyers on the horizon? According to Fannie Mae’s Perspectives report released Tuesday—the labor market characterized by the prevalence of short-term contracts or freelance work—known as the gig economy, is increasing.
Utilizing Fannie Mae’s Q3 National Housing Survey, authors Tom Seidenstein and Sarah Shahdad, Market Insights Researchers for Fannie Mae’s Economic and Strategic Research Group, delve into data to grasp an understanding of gig economy workers’ attitudes towards homeownership.
According to the survey, an estimated one-fifth of American adults have provided a service through the gig economy—and they generally have a positive perspective about their financial position overall and aspire to own a home. However, gig economy workers who rent have a more negative view than non-gig economy workers who rent when it comes to homeownership goals.
The report notes that 44 percent of gig economy workers are between the ages of 18 and 34 years old—or millennials. As an expanding part of the workforce, they are mainly defined as college educated at 66 percent, full-time employed at 83 percent, and simply use gig economy to supplement their income, making about $50,000 or more per year in total. As a result, gig economy workers report increased household incomes.
When it comes to views of renting vs. buying, the survey finds that "gig economy workers who rent are about as likely as other renters to prefer homeownership to renting, but they are less likely than other renters to think it is a good time to purchase a home or to say they will buy a home when they next move.”
From a financial perspective among current renters, 63 percent of gig economy workers responded that owning a home is sensible, while 34 percent responded that renting makes more sense.
The numbers experience a slight change when it comes to homeownership from a lifestyle perspective, as 54 percent of gig economy workers reported owning a home makes more sense, and 44 percent responded that renting is more practical.
In terms of now being a good time to purchase a home, gig economy workers are less likely than other renters to become potential homeowners, with 52 percent responding that it’s a bad time to buy, and 40 percent responding it’s a good time to buy.
A reflection of these numbers is that most gig economy workers who rent think it would be difficult to get a mortgage—at 68 percent—and attribute this to down payment and credit as the biggest challenges to getting one.
“One area for further research is to determine to what extent current underwriting standards sufficiently account for the potential of gig economy income to supplement other full-time income sources,” Seidenstein and Shahdad write. “And the salience of this research question will grow if gig economy participation continues to grow.”
To view the full report, click here.