At the kickoff of the spring home buying season, the U.S. homeownership rate has fallen to 63.8 percent, its lowest point since 1989. While market experts expressed nominal confidence for a return, there are a few rays of hope on the horizon.
Despite a drop in homeownership rates, the rate of total households – which includes both homeowners and renters – appears to be on the rise.
Economists say that’s a good thing. The majority of renters eventually become homeowners, and some experts suggest that the influx of tenants may be a sign that people are moving out of relatives’ homes and living back on their own.
As if student loan debt, stagnant income levels and a tighter inventory of lower-priced homes isn’t enough to inhibit future homebuyers, experts fear that the high costs of rent may hinder folks from saving for a down payment, or cause them to forgo home purchasing altogether.
Here’s why people shouldn’t put off home buying:
Homeownership continues to be one of the fastest ways to acquire long-term wealth: The median net worth of homeowners averages $195,000, while the net worth of renters is just $5,400.
Mortgage rates remain at historic lows: The average 30-year fixed-rate mortgage is about 3.65 percent – down from 4.33 percent just one year ago. Refinancing rates follow a similar trend, and are more likely to drop monthly payments significantly.
Renting is more expensive than owning: In fact, the cost of homeownership is roughly 38 percent less than rental costs, according to Trulia.
There are more home buying assistance programs than ever before: The current economic climate has led agencies to create products to stimulate home purchasing. Fannie Mae recently announced a 97 percent loan-to-value option for first-time homebuyers, and other services, such as credit monitoring or down payment assistance, are expanding as well.
We’re pleased about the many industry initiatives put in place to help potential buyers fulfill or return to their dreams of homeownership. The housing industry has a long way to go until it fully recovers, but it gets a little bit closer each time a new homeowner gets the keys to his or her future.
-Chad Jampedro is president of Brookfield-based GSF Mortgage.