Real Estate Market

Renting gains in popularity, as home ownership shrinks

(12/24/2010) Erate Exclusive - Most Americans retain strong desires to become home owners, but find it tough to overlook economic roadblocks that prevent them from realizing their dream.

A slim majority, 51 percent of current home owners and renters say that the housing crisis has not affected their overall willingness to buy a home, according to Fannie Mae's 2010 Own-Rent Analysis component of its National Housing Survey.

However, near-term doubts about buying resulted in 33 percent of those surveyed saying they would be more likely to rent their next home than buy, up 30 percent from January this year, Fannie Mae's survey found.

"Despite Americans' strong desire to own their homes, our study reveals that life events are greatly influencing families' decision to rent. This trend, coupled with the housing crisis, has caused consumers to approach home ownership with greater caution and thoughtfulness," said Doug Duncan, Fannie Mae Vice President and Chief Economist.

The rate of home ownership, 66.9 percent, is at its lowest level since 1999.

A recent Harris Interactive survey backs up Duncan's comments and reveals consumers aren't as bullish on a housing recovery as economists.

Many economists forecast a housing recovery by the end of 2011, but the Harris study found that 58 percent of those surveyed, mostly home owners, but also renters, believe recovery won't begin until after 2012. More than one in five home owners and renters say the tarnished housing market won't begin to show gold again until 2015 or later.

Housing consumers enjoyed the up cycle of the last boom, but they've also suffered the down cycle of the current bust -- lost jobs, reduced income and dwindling home equity -- and their confidence in housing is suffering.

A home is often someone's most valuable asset, however, the slim returns from a savings account is considered a safer investment among 75 percent of those surveyed, compared to buying a home (66 percent), according to another component of Fannie Mae's housing survey.

"Our survey shows that Americans' declining optimism about housing and their personal finances is reinforcing increasingly realistic attitudes toward owning and renting," Duncan said.

Fannie Mae's rent-own survey also found:

• A vast majority of homeowners, 89 percent, and 44 percent of renters believe they would be better off owning their homes, given their current financial situations.

• But renters aren't buying. More than half (57 percent) of renters believe financial benefits are the best reason for renting a home. Based solely on current household finances, 52 percent believe they are better off renting, compared to 24 percent among the population at large.

• From January 2010 to third quarter 2010, the percentage of renters who say they will probably continue to rent in their next move increased from 54 percent to 59 percent.

• Sixty-four percent of renters who do not plan to own and half (50 percent) of those who do plan to own probably do not have sufficient income to qualify for the mortgage on a median-priced home, based on Fannie Mae's calculations.

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