Elevated home prices have made the prospect of purchasing property for the first time especially daunting. Broadly speaking, that has not quelled Americans' desire to become homeowners, shows a LendingTree survey, which reported 88% of consumers who responded to its poll said they would rather own their home than rent. That said, almost half of those who rent are worried they will never own a house.
Commenting on the research, LendingTree author Kamaron McNair details some of the real benefits of homeownership, including the ability to build wealth by adding home equity to net worth. The research also determined that, while stability is the second-most popular advantage of owning, those who make less money see this as a greater benefit.
In fact, stability was cited more by people who make less than $35,000 a year—59%—as a reason to own a home than those making $100,000 or more, 49%.
"Alternatively, those in the lowest income bracket are less enthralled by a home helping them build wealth than those in the highest income bracket," McNair noted. "Wealth-building as a primary asset of homeownership was named significantly less by folks making less than $35,000—30%—than those who make $100,000 and up, 54%."
The author explains the most significant hurdle to homeownership for most people is down payment. Even as rents outpace house price growth in many parts of the country, buying a home requires more money saved.
"A renter might need three month’s worth of rent to move into a space, on top of broker’s fees, application fees and moving costs, which can add up to a large sum of money," wrote McNair. "Still, that amount will likely be far less than a typical 20% down payment on a home, which 54% of non-owning consumers say is the primary barrier to them buying a home. The figure jumps to 68% of folks who make less than $35,000 a year." And if the perspective homeowner does not have an excellent credit score, it can become even more challenging.
And the existing market is not exactly favorable to new buyers, as LendingTree's Senior Economic Analyst Jacob Channel points out. He says renting might just make more sense for the time being, however, he adds some suggestions for renters who are serious about homeownership.
"There are many pathways to homeownership, but nearly all of them require patience," he said and suggested exploring options such as Federal Housing Administration (FHA) loans, while warning that smaller down payments usually result in higher monthly mortgage payments. He also warns of the pitfall of a consumer getting into a mortgage he, she, or they cannot afford: "Renting a home that you can afford is usually better than owning a home that you can’t."
The researchers asked the 2,050 respondents about the biggest perceived obstacles. Here is a summary of the responses:
- 76% of renters said they would rather own a home; 2% of homeowners would rather rent.
- For 63%, the reason for people wanting to own is flexibility to do what they want with the space, followed by 55% citing stability, and 50% saying the pride of homeownership is their motivator.
- 48% of those who prefer renting say having someone else to be responsible for maintenance and repairs is a big enough perk to defer their desire to own. 38% of rent-preferring people also appreciate easily moving to different places and 37% cite affordability.
- 54% of those who want a home but still rent say they can’t afford a down payment. Other common barriers include too-high home prices, 36%, and difficulty qualifying for a mortgage due to a low credit score, 32%.
- 48% of renters are worried they’ll never be able to own a home. By age groups, 55% of Generation X—41-55 year olds—who don’t currently own are concerned, more than any other age group.