Tuesday, December 1, 2015 / by Angela Hunter
The national homeownership rate continues to fall. In the third quarter of the year, it fell slightly to 63.7% from 64.4% last year this time, according to The Commerce Department. So what does that mean for Realtors?
First of all, don’t panic. Homes are selling, and increasingly, millennials are buying. Watching the quarterly homeownership rate can drive you batty, but we’re here to put it all in perspective. Here’s what you need to say when you face the housing naysayers.
- The Crash: The housing market crash wiped out more than 7 million homeowners. Foreclosures, short sales and deed-in-lieu of foreclosure sent waves of former homeowners into rental properties. With ruined credit, many are just now starting to regain their financial stability. Many former homeowners are re-entering the housing market. Home Sales were up almost 5% in September, according to The National Association of Realtors. Home sales are now nearly 9% higher than last year.
- Rising Rents: Rents are at a seven-year high. Eventually, people will have to start buying homes just to save money. The rental vacancy is falling meaning more and more people are renting. What’s worse, they’re spending a greater share of their monthly income on rent. That is not sustainable. As rents increase people will seek other options and buying a house is an affordable option.
- More Affordable: Buying a house is more affordable than renting. People tend to think that renting is easy and less risky. But rents have increased faster than wages, faster than home appreciation. For that reason, it makes more sense to buy than rent. Housing Affordability Index by NAR is at 157.7 in August. That means
- Tight Credit: Credit restrictions kept many potential buyers sidelined. Now that credit is easing, the Federal Housing Authority has a new program called “Back to Work.” It allows people to buy homes just 12 months after a hardship — job loss, foreclosure. Of course the prospective home buyer would need to show they are currently in good standing with all of their credit obligations, but this new FHA loan can turn a renter into a buyer with a 3.5% down payment. The path to homeownership is being paved and many of those renters can soon become owners.
- Tight Inventory: It has taken years for many homeowners to regain their equity after the crash. Now that prices are up, homeowners have equity they can tap into either through a cash-out refinance, or more importantly to sell. According to CoreLogic, home prices increased over 6% in August. More than 19% of all mortgaged homes now have at least 50% equity, according to RealtyTrac, a California-based analytics company.