March 17th, 2014
Consumers are ready to push their rental applications to the side and break into home ownership in 2014.
According to Zillow’s Housing Confidence Index, 4.2 million renters report they are ready to buy a home. The index surveyed 20 metro areas, and in 19 of the target regions, more than 5 percent of residents said that homeownership was a goal they wanted to attain within the next year. Despite rising property values and expectations that mortgage rates will climb in 2014, most of the respondents were confident or somewhat confident they could afford to purchase a home.
The consumers who reported their desire to move from renting to homeownership represent 4.2 million potential first-time homebuyers, which would be more than two times the number of first-time buyers recorded in 2013 – 2.1 million. Renters in Miami, Atlanta and Las Vegas – three metro areas greatly affected by the housing downturn – had the greatest aspirations for homeownership, with each city scoring 67.4 percent, 63.9 percent and 63.4 percent, respectively, on the Homeownership Aspirations Index.
The U.S. overall notched a 59.3 percent score on the index, and 10 percent of renters indicated they wanted to own a home within a year.
Challenges for potential homebuyers
Zillow noted that confident consumers who are considering homeownership may have a number of obstacles if they decide to enter the market. Inventory is still tight in many areas, with the online real estate information company reporting year-over-year declines in the number of available homes in eight of the metro areas measured by the ZHCI. While construction for rental properties is increasing, single-family housing starts are growing at a slower pace.
The aforementioned mortgage interest rate hikes may also present a challenge for potential homebuyers, with Zillow reporting the national average sat at 4.2 percent as of March 13. Consumers hoping to make the transition in 2014 have to be aware of these challenges while attempting to buy a home.
“Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit,” said Dr. Stan Humphries, Zillow chief economist. “But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers.”