Survey: Affordability Drives Purchase and Rental Decisions

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Survey: Affordability Drives Purchase and Rental Decisions

More than 4 out of 5 current renters (84%) think renting is more affordable than owning, according to Freddie Mac – but 42% of those renters are cost-burdened, spending more than one-third of their monthly household income on housing.

WASHINGTON – A new Freddie Mac survey finds that affordability drives most homebuying and rental decisions.

The survey, “Profile of Today’s Renter and Owner,” finds that the vast majority of renters and owners believe their current living situation is their most affordable option, but affordability issues remain pervasive.

“The housing market is strong and, based on our survey, the low mortgage rate environment may inspire both renters and owners to make an educated move this spring,” says David Brickman, CEO of Freddie Mac. “While baby boomers tend to be satisfied with their current housing situation, younger generations are still struggling to determine whether to rent or purchase a home, largely due to lack of supply and affordability constraints.”

Renters see renting as more affordable

When it comes to renting, the survey finds that an unprecedented number of renters (84%) believe renting is more affordable than owning – an all-time high for the survey and up 17 percentage points from two years ago. Additionally, a majority (62%) of renters is still satisfied with their rental experience, though that’s down slightly from 66% in 2018. In fact, 73% of renters are satisfied or nearly satisfied with the condition of their unit, saying no or few renovations are needed.

However, Freddie Mac says the latest info does “paint a concerning picture about many renters’ ability to make housing work within their family budget.”

  • 42% of renters are currently cost-burdened, i.e., paying more than one-third of their income for rent – up eight points from just April 2019. Only 24% of owners spend the same amount, a number that has not changed in recent years.
  • 18% of renters aren’t interested in ever purchasing a home, up four points from August 2017.
  • 69% of renters are concerned about their rent going up in the next 12 months and not being able to pay for their larger expenses (68%).
  • 67% of renters have made spending changes or moved to afford their monthly housing payment, up five points from April 2019. Among those who live in rural areas, 70% made changes to afford their monthly payment (up from 59% in April 2019). Eighty-two percent of renters in the “essential workforce” also had to adjust (up from 76% in April 2019).
  • Half of all renters are finding it difficult to find affordable housing that is close to work, up 22% since April 2019. This includes 57% of essential workers, up 23% from April.

Interest rate environment

With mortgage rates near historic lows, both renters and homeowners are interested in taking advantage of low rates in the next several months. In fact, 40% of renters plan to purchase a home given current interest rates, and 46% of owners plan to renovate their home. In addition:

  • 29% of owners plan to refinance
  • 27% would like to purchase a new home or additional investment property
  • 26%plan to sell their current home and purchase a smaller one
  • 24% think it is likely they would sell and purchase a larger home

The survey also finds that baby boomers are the least likely to take action in the low mortgage rate environment.

Boomers: Comfortable yet unnerved by rate changes

Compared to other generations, baby boomers stood out in the survey. As owners, they’re highly satisfied (71%) with their overall experience and prefer to live in a small home (61%). But boomer renters are also largely satisfied (50%) compared to other generations (older millennials, 39%; Gen X, 35%; younger millennials, 33%).

Further, growing portions of boomer renters (27%) say they will never move compared to Gen X (9%) and Millennials (6%). The same is true for boomer owners, with an increasing percentage (34%) saying they will never move compared to Gen X (18%) and millennials (8%).

Source: Freddie Mac

© 2020 Florida Realtors®

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