A recent report has found increasing levels of confidence in the US residential real estate market and interestingly enough particularly amongst those who rent homes. According to the article in Propertywire, more than 5 million people currently renting a home are likely to buy a property within the next year.
This is based on the latest Zillow Housing Confidence Index. Overall the index found that both homeowners and renters were more confident in the real estate market this year compared to last. Confidence was particularly high in San Francisco, San Jose and Miami but confidence has increased the most in St. Louis, Detroit and Dallas. Not surprisingly homeowners are more confident than renters, but renters’ confidence in the real estate market is increasing more quickly than homeowner confidence in 14 out of the 20 Metro areas covered in this index.
When the figures are broken down they show that more than 12% of people currently renting, which equates to 5.2 million, have plans to buy in the next year. This is an increase of nearly 25% compared to the same period last year when 4.2 million renters had plans to buy a home within the next year. At the moment, with home values just below the peak levels and historically low mortgage rates, buyers can typically expect to spend around 15% of their monthly income on mortgage payments. This compares to a historical level of 22%. In comparison renters expect to pay around 30% of their income on rent compared to a figure of 25% just a generation earlier.
It’s easy to see why so many people would like to buy as a home affordability compares extremely well to rental affordability. As a result many people currently renting homes are rethinking the way they regard home ownership, but unfortunately not all those who want to buy will be successful. It’s still not easy for many people to qualify for a mortgage, let alone save for a down payment and then there is the problem of finding an affordable home to purchase.
Overall, 59.7% of renters think buying a home is the best long term investment they could make compared to 56.9% at the same point last year. The improvement was particularly noticeable amongst younger renters as a 66.2% of those aged between 18 and 34 thought learning a home would be a good long-term investment compared to 61.4% year earlier.