Fewer Renters are In The Mood (to Buy a Home)

According to the latest edition of The U.S. Housing Confidence Survey (HCS), renters continue to have positive homeownership aspirations. For example, in January, more than six in ten of the 3,741 renters surveyed across 20 of the largest U.S. cities said that they believe that owning a home provides a person more freedom than renting and that being a homeowner is necessary to live “The Good Life” and the American Dream. With renter aspirations positive, mortgage rates (still) very low, and home price appreciation rates moderating in many cities, market conditions at the start of this spring home buying season might seem ideal for renters and other prospective first-time home-buyers.

Not in The Mood… Not Now, at Least

However, renter confidence is stuck well below levels of homeowner confidence  (these are quantified and tracked as components of The Zillow Housing Confidence Index), and for a few individual cities, is at near-deficit levels. Although still in positive territory, The Renter Confidence Index has dipped over the past year, and data underlying this gauge (see below plots) indicate that home-buying sentiment among renter households is weakening. For example, while a majority of renters (58 percent) said they expect to buy a home within the next five years, only 40 percent of them said that “now is a good time to buy a home”.

Fewer renters say that “now is a good time to buy a home.”

Disproportionate numbers of renters are experiencing below-average wage growth and have meager savings (and burdensome debt levels, i.e., unpaid student loans and credit card balances). These financial capacity limitations–along with a dwindling inventory of affordable single-family homes–are weighing-down renter confidence in the housing market, and contributing to a wider gap in transaction sentiment.

The Gap

As noted above, only 40 percent of the 3,741 renters surveyed in January said that “now is a good time to buy a home” (of all 10,000 households surveyed, i.e., homeowners and renters combined, 54 percent said so). In contrast, almost two-thirds (64 percent) of the more than 6,259 homeowners surveyed said: “now is a good time to sell a home.”

Unfortunately for renters, owners’ generally upbeat assessments of selling conditions are not translating into increased listed inventory–especially in the entry-level segment of the market. As much as existing homeowners may wish to trade-up and relocate, there are still at least six million of them for whom economic reality prevents them from planting a “For Sale” sign on the front lawn.