A breakdown of attitudes among young homeowners and renters by Fannie Mae’s Economic & Strategic Research Group finds that while most renters still dream of owning a home, few are taking steps to prepare for a purchase.
Analyzing survey responses taken from last year’s third quarter, Fannie Mae researchers found the majority of younger renters believe owning makes more sense “because you have more control over where you live and a better sense of privacy and security.”
At the same time, however, a growing group—41 percent compared to 37 percent a year earlier—said renting is the more sensible choice “because it is less stressful and gives you more flexibility in future decisions.”
Even among those who would prefer to own a home, the majority remain pessimistic about their ability to get a mortgage, with down payments and credit scores cited as the top obstacles. According to the group, the majority of today’s younger renters lack assets enough to cover even a 5 percent down payment along with closing costs on a typical starter home.
Unsurprisingly, younger homeowners—who are more likely to earn higher household income, have full-time employment, and fall into the higher end of the age range—are more optimistic on their “lendability.”
“The widening of that same gap during the last few years suggests that confidence in one’s ability to get a mortgage is growing primarily among those who have already met financial requirements,” said Sarah Shahdad, an analyst for the group.
Perhaps due to their pessimism, only about a quarter of renters in the third quarter said they are renting in order to prepare themselves financially for ownership, down from more than a third the year prior. While alternative paths to homeownership may help some renters—about half of whom said they plan to buy a home the next time they move—with the environment the way it is, it may be a long way off before those renters become owners.
“Our results suggest that many younger renters may continue to rent longer due to insufficient financial capability and/or preparation, despite the majority's preference for owning,” Shahdad said.