The competitive homebuying market brought on by short inventory supply is causing potential buyers to keep their renting options open, according to the latest Zillow Group Report.
Zillow found that on average renters spend about 10 weeks looking for a new place. Buyers spend about 17 weeks. Add to that the fact that at almost half of all buyers are first-time buyers, and 54 percent of buyers do not get the first house they bid on, and suddenly it forces house hunters to consider staying in rental properties longer, Zillow reported.
The times only get longer the lower the income of the buyer. Low-income renters spend on average 12 weeks looking for a rental, Zillow found. And for many renters, buying is not a financial option. The median income of homebuyers is $87,500 a year, while renters make, on average, $37,500.
“The line between renting and buying is blurry, and that's a sign of the times,” said Zillow chief marketing officer Jeremy Wacksman. “It’s difficult and time-consuming to find a home to move to, especially in competitive housing markets. Savvy shoppers have a Plan B, hoping to buy if it works out, but willing to sign a lease for a home if they don't make a deal by the time they need to move.”
According to Zillow, among those who bought a home in the last 12 months, 66 percent of millennials considered renting as well. Just over half (54 percent) of Generation X buyers considered renting, as did 32 percent of Baby Boomer buyers.
Younger renters are also more flexible when looking for a home to rent—63 percent of Millennials and 59 percent of Generation X renters considered buying while looking for a rental. Among renters over 50, most did not consider buying at all.
Renters, once an afterthought to many in the housing industry, have become a significant pool. Last week, the U.S. Census Bureau reported the homeownership rate hit 63.5 percent in Q3. While that’s an improvement over Q2, it’s barely about a half-century low.