In a recent Freddie Mac survey, a record 82% of renters said renting is more affordable than owning. That’s up from the 67% who also thought it was cheaper just a year ago.
That is a significant number of potential homebuyers that don’t see homeownership as being in their best interest.
What is important to remember, though, is that many of those renters would actually like to own a home. Affordability remains the issue. While there may be some mortgage education that could help some renters change their minds about affordability, market conditions, the lack of “first home” inventory, and rising home prices will continue to make affordability an issue for many potential homebuyers.
Even if misconceptions about the affordability of renting can be overcome, Realtor.com says it’s seeing recent gains made in inventory starting to slip. Over the next few months it’s likely we will see inventory level out and then begin to decline. That will put more pressure on the market, resulting in increasing prices and renting will likely continue to be more affordable for many people.
As demand for rentals goes up (and so does monthly rent) it will become more and more difficult for many renters to save for down payments, even if they wished to buy. There again it will be about education and innovation in home financing that will be needed to bring many renters to the market, assuming there is inventory to purchase.
As we enter the bulk of the campaigning to be done for the 2020 presidential election, housing is likely to become a topic for both parties. It will be interesting to see if either is smart enough to realize we still have what amounts to very favorable financing options for first-time homebuyers — like we did when VA lending after WWII made homeownership, the American dream, a reality for many. The difference is we had the room to build in fairly close proximity to where people wanted to live and builders could build those first homes to meet demand and make a few dollars. It all made for a very healthy market.