In discussing what influences consumers to rent a home or buy a home, it would interest you to know that almost every American citizen desires to be a home owner, not minding the biggest housing crisis that has rocked the country since the Great Depression. This conclusion was reached by Fannie Mae, the government-owned housing agency, after a recent study which at the same time, attempted to answer major real estate questions like: What influences consumers’ current home ownership status? What would motivate us to buy versus rent in the future? And are we influenced by unconscious biases that lead us to make less than ideal choices, such as buying too much house, or others that might prevent a well-qualified renter from buying at all? As a real estate investor, the answers to these questions could influence me on how I do marketing, what houses I invest in, and in what sector of the housing market I focus.
One of the reasons why Fannie Mae had to investigate and find answers to these questions bordering mainly on the issue of whether to rent a home or buy a home is because the answers to these questions have implications for housing policy makers and the industry. In the course of the survey, it was determined that a higher percentage of Americans would love to be home owners.
“About 85% Americans said owning makes more sense than renting over the long term, and 64 percent of those polled said that they would buy a home if they were going to move.”
In carrying out the survey, Fannie Mae took a critical look at the three different groups of consumers in real estate: renters, homeowners with a mortgage, and those who own their homes outright. “The Fannie Mae National Housing Survey polls 1,000 adults each month across the United States with more than 100 questions about the economy, household finances and owning and renting; this study’s full-year data includes information from more than 12,000 people.”
“It was determined that demographics, which includes but not limited to marital status, employment status, income and age were the major factors that influenced people’s desire to be homeowners and as such, play major roles in deciding whether to rent a home or buy a home.”
The survey also revealed that homeowners with mortgages were mostly married, middle-aged and working full time with higher incomes. For renters, it was the other way round. As for the outright homeowners, they were mostly the retired, older and widowed citizens who are way past their peak earning years. The study went further to state that “renters’ and people with mortgages’ who had ‘intentions’ to buy or rent as their next move were largely driven by their financial and housing attitudes.” Therefore, the most influential factor as far as the three groups are concerned became the long term financial benefits of outright ownership of a home.
“…the most influential factor as far as the three groups are concerned became the long term financial benefits of outright ownership of a home.”
This means that as a real estate investor, it becomes necessary that you know some of those things that would influence the people’s decision to buy a home instead of opting to rent a home. The ease with which the people get mortgages will go a long way to determine the percentage that would settle for mortgaged homes.The Fannie Mae survey also found that “once consumers buy a home, get a mortgage and have a positive experience owning, they wanted to continue to own. But concerns about affordability — both for the home purchase itself and upkeep — were a major factor that discourages renters from taking the plunge.”
“…once consumers buy a home, get a mortgage and have a positive experience owning, they wanted to continue to own. But concerns about affordability — both for the home purchase itself and upkeep — were a major factor that discourages renters from taking the plunge.”
The study also states that “For renters and mortgage-owners, aspirations for and belief in home ownership play a major role in decision-making, possibly forming a ‘home ownership optimism’ in determining whether they expect to own or rent in the future. It is possible that many of these drivers, especially the attitudinal ones, act as automatic or unconscious biases that lead consumers to less fulfilling and less successful housing choices,” the researchers concluded, stating that further research is necessary.
In all, the survey respondents stated that exposure to default, perceived appreciation or depreciation in home value, and self-reported underwater status had only a minimal effect on predicting whether they intended to buy or rent for their next move. Are you a renter or a home owner? What influenced your decision to rent a home or buy a home? Are you satisfied with the decision you made as a renter or home owner? Has your views on outright home ownership been altered by the housing crisis?
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This post was originally written and published on CNBC on Tuesday, 7 August, 2012 by Tara Siegel Bernard of The New York Times.