Despite the affordability challenges, optimism reigns

A lack of affordable homes for entry-level buyers, slow income growth, and uncertain political outlook could all make homeownership less attractive. According to NerdWallet’s online survey, The Harris Poll, the American dream of owning a home is still alive and well.

According to a survey of 2,007 Americans, more than 4/5 (84%) Americans believe that buying a house is important to them. This number has increased from 75% when NerdWallet first asked.

More Americans feel confident about being able to purchase a home in 2009 than they did last year (44%) according to a new survey. An estimated 27 million people plan to purchase a home within the next 12 months.

Holden Lewis, NerdWallet mortgage and home expert, says that there is a huge demand for homeownership. These people are optimistic but know that there is a lot more to it than they realize. They want to feel confident in finding a home that they can afford and qualifying for a mortgage. Estimates suggest that 6 million homes, both new and old, will be sold by 2020. Well-informed buyers will have an advantage .”

• Since our first survey, an increasing number of Americans believe that homebuying is a priority. Eighty-four per cent of Americans agree with this statement, up from 75% in 2018. This includes 84% of Generation Z and 88% of millennials. It also includes 85% of Generation X and 79% for baby boomers. For more information on generation definitions, please see the study methodology. )

• Nearly 100 million Americans hope to buy a house in the future, or 39 percent of Americans. That’s a staggering 99.3million people. This staggering number is a sign of radical optimism among potential buyers for 2020 and beyond.

• Some feel still locked out of owning a home. 42% claim their low income is preventing them buying. According to NerdWallet analysis, the market rebounded in 2012 and incomes of Americans aged 25-44 — the most likely group to consider a home purchase for the first time — increased 24%. However, the list prices for the most affordable homes rose 86%.

• Plans could be affected by the economy and election year. Nearly half (49%) of Americans believe that the current economic and political climates would increase their likelihood of purchasing a home in 2019. This compares to 29% who stated it would make them less likely. 26 percent of Americans who plan to purchase within the next five-years say that they would reconsider their decision or give up on buying if their presidential candidate loses the 2020 election.

39 percent of Americans plan to buy a home within the next five-years, or roughly 99.3 million. Another 11 percent will purchase a home within the next twelve months. According to the U.S. Census and the National Association of Realtors, only 6 million homes sold in 2019. These sales could be a sign that Americans feel confident about their ability and willingness to buy, regardless of whether they make the plans a reality.

52 percent of people who plan to buy in the next five year say that they feel more confident about their ability than last year. Many (61%) of them believe it is because they have more income.

Homebuying is becoming a more important priority for increasing numbers of Americans. This growth could be explained partly by the millennials, who are the largest generation of U.S. adults, reaching peak homebuying age. The survey found that 88% of millennials consider homebuying a priority. This includes 84% of Generation Z, 85%, and 79% for baby boomers.

This is another indicator that people believe the future is bright. More than half (55%) Americans think buying a house is a priority because it’s an investment.

According to Lewis, “A home may be a good investment but it all depends on the home you buy, when it is bought, and how long it stays in your possession.” Home values have risen steadily over the past eight years in most areas. However, if your home was purchased during the height of the housing boom of 2007, it could take more than a decade for its value to recover from subsequent crashes .”

A staggering 30.8 million Americans (12%) plan to become first-time homeowners within the next five years. According to Genworth Financial’s early estimates, roughly 2 million homes sold to first-time home buyers in 2019, there is a good chance that some of these hopes are dashed.

Generation Z and millennials are the most ambitious generation of Americans. 57% and 53% respectively of Generation Z and millennials plan to buy in the next five-years. This compares with 42% and 23% for baby boomers and Generation X.

Lewis says that in order for everyone’s homebuying dreams over the next few decades to become a reality, builders will need to increase their pace of homebuilding. Landlords will also have to sell millions to the owners who will be living in them. These issues cannot be solved by the markets in the near future. It could be necessary for the government to intervene quickly .”

Younger buyers could be tempted to buy, but not knowing how financially ready they are to make that purchase. It can be difficult to decide how much down payment you will need, what size monthly payments you will have, and what ongoing homeownership costs such as repairs and maintenance are worth. It is possible to make costly mistakes if you buy too quickly.

29 percent of homeowners feel less financially secure after buying their home. This is compared to 39% of Generation Z and 22% of Baby Boomer homeowners. This is especially true for younger homeowners: 54% of Generation Z homeowners and 42% of millennial homeowners felt the same way, compared to 31% of Generation X homeowners and 16% of boomer homeowners.

Tip for home buyers: Being ready to purchase a home doesn’t just mean having the money to pay a downpayment and being able to afford a monthly mortgage payment. Before you decide to purchase, be sure to consider all costs associated with homeownership. You should allocate a portion of your budget to home repairs and maintenance. Also, ensure that you have an emergency fund in case the furnace, roof, or other large-ticket item needs to be replaced.

This optimism does not mean that homebuyers are seeing the world through rose-colored lenses. Many people recognize the importance of affordability.

37% (75%) Americans think it is more difficult today to buy a home than 25 years ago.

Lewis says that while affordability can be difficult to measure, homeownership rates are not. “When homes become more expensive, homeownership rates tend to fall.” It has fallen for those in their 30s, who are the prime years to buy a home .”

The homeownership rate for 25- to 39 year-olds dropped from 54% to 46% between 2000 and 2018, according to NerdWallet’s analysis of Census data.

Lewis states that “we know these young people want homes, contrary to some of the beliefs held by boomers,” and says that lack of affordability is most likely to be the reason for their declining homeownership rate. This is mostly due to home prices rising faster that incomes, but student loan debt is also an issue .”

Since 2012, when the economy started recovering from the Great Recession, the list prices of the most affordable homes has increased by 86%. In the same time frame, the median income of Americans aged between 24 and 50 for first-time home buyers rose by just 24 %.

Nonhomeowners were asked about their biggest obstacle to purchasing a home. It was 42 percent. The second most popular response was not having enough money to pay a downpayment (37%). The second most common response for current owners looking to move or upgrade was a shortage of homes available (either in their budget or in the area that interests them) (23 %).

Higher savings goals can make it more difficult to reach your goal. Some homebuying prospects may set a too high down payment goal.

A majority of Americans (62%) think that a 20% down payment is necessary to buy a house. This is the same as last year’s question.

Tip for home buyers: Although a large down payment is not necessary, it will provide you with more equity and lower monthly payments. There are many mortgage options available, including zero down payment, 5%, and 3%. Before you decide on the best option for your situation and long-term goals, use a down payment calculator.

A 20% down payment for a home worth $250,000 would be $50,000 upfront. A 5% downpayment on the same house would cost you $12,500. The larger down payment would reduce your monthly mortgage payment by just a few hundred dollars. You could also save approximately $28,000 on interest over the loan’s life.

Although 30% of Americans think we are headed for a recession in 2019, this is still a significant decrease from September 2019. 37% of respondents thought that a recession was imminent.

This shift is reflected in almost half of Americans (49%) who believe that the current economic and political climate would increase their chances of buying a home in the next year, compared to 29% who think it would make them less probable.

It is a big leap to homeownership, and there are many unknowns that can lead to stress. To better understand the realities of the homebuying process, we asked recent buyers and prospective buyers questions about their expectations. It turns out that buyers who plan to buy in the next five year anticipate stressors more than those who bought in the last five years.

The first step in buying a house is to buy it. If asked by Americans what their top financial stressors will be for the next two-years, 27% responded that they would like to pay down/off credit cards. However, homeowners say home repairs and maintenance are their top financial stressors. This would be the number one money stressor for 25% of homeowners.

“Buying a house is one step towards adulthood. Lewis states that maintaining a home is another step in adulting. You can be confident in your ability to manage the home .”

METHODOLOGY

The Harris Poll conducted the home buyer surveys online in the United States for NerdWallet. It was conducted between Jan. 6-8 2020 among 2,007 U.S. adult 18-year-olds, Jan. 16-18-19 2019, among 2,029 U.S. adult 18-year-olds, and Dec. 7-11 2017, among 2,165 U.S. adult 18 years and older. Online surveys do not use a probability sample so it is impossible to estimate the theoretical sampling error. Marcelo Vilela, [email protected] can provide more information about the survey methodology including weighting variables, subgroup sample sizes and other details.

NerdWallet defines generations to be: Generation Z, born 1997 or later; Generation X, 1965-1980; and Baby Boomers, 1946-1964.

The First-time homebuyer affordability chart includes Zillow median listing price among bottom-tier houses and U.S. Census 2018 one year estimates of median household income among households aged 25-44. These were then increased to 2019 using the Bureau of Labor Statistics Employment Cost Index.

Population calculations are based upon the U.S. Census estimates of population as of July 1, 2019.