With home sales reaching multi-year highs and prices outpacing expectations in the first quarter, the housing recovery is restoring public confidence in homeownership and raising questions about the future demand for expansion of single and multi-family rental capacity.
Even though first-time home buyers are frustrated by difficulties getting financing and meager inventories of entry-level homes for sale, the robust recovery seems to be changing public attitudes towards homeownership.
In its quarterly forecast last week, Fannie Mae’s economists projected that existing-home sales, which were up 9.4 percent last year, will grow by an additional 6.9 percent this year, to 4.98 million homes, compared to last month’s projection of a 10.5 percent jump this year, to 5.15 million homes. They estimated existing-home sales will rise 5.5 percent in 2014, to 5.26 million homes, compared to last month’s prediction of a 6.2 percent rise.
A national Gallup survey released the next day found that Americans’ dream of owning a home is alive and well, evidenced by the fact that most Americans own a home and plan to continue to do so (56 percent), or don’t own a home but plan on buying one in the next 10 years (25 percent). Eleven percent of Americans don’t own a home and have no plans to buy one, and 3 percent own a home but plan on selling it and renting in the next 10 years.
Some 34 percent of Americans rent and the remainder has other arrangements. Both homeowners and non-homeowners were asked questions about their future plans. The results give little indication of a desire on the part of current American homeowners to sell their home and begin renting, and an apparently strong desire on the part of U.S. non-homeowners to buy a home in the future.
Overall, while 62 percent of the American population currently owns a home, a considerably larger 81 percent own a home and express a desire to continue to do so, or don’t own a home but express a desire to buy one within the next 10 years.
Younger Americans also say they are likely to buy a house. Nearly 7 in 10 Americans aged 18 to 29 currently do not own a home, but plan on buying one within the next 10 years. Coupling this with the 21 percent of younger Americans who say they already are homeowners leaves few adults under 30 who say they don’t own a home and have no plans on buying one.
Income is a major predictor of homeownership. Three-quarters of those making at least $75,000 a year own their home and plan on continuing to own, while another 15 percent say they will buy a home within the next 10 years.
The hope of being able to buy a house is relatively strong even in the minds of those with below-average incomes, given that between 35 percent and 40 percent of Americans making less than $50,000 a year say that while they currently don’t own a home, they plan on buying one in the future. About a third of those making less than $20,000 a year say they don’t own and have no plans to.
Fannie Mae’s March National Housing Survey provides further evidence of a swing away from rental and towards homeownership. Though 64 percent said they would buy if they had to move today, down from 67 percent in February, half those surveyed say home rental prices will go up in the next 12 months, holding steady at the highest level since the survey’s inception for the third-straight month.
A recent major study by the MacArthur Foundation for the exact opposite of the Gallup and Fannie Mae research: that slightly more than have of adults believe buying is less appealing than it used to be and that renting is more appealing (See Americans Exit the Housing Crisis with New Appreciation for Renting.) However, the MacArthur Foundation study did find that nearly three out of four (72 percent) of the renters among the 1433 adults who took part in the survey still aspire to own a home at some point in their lives.
At stake is not only future first-time buyer demand for home sales but also future tenant populations for the largest multi-family construction boom in decades. Slightly more than half of all rental units in the U.S., or around 21 million units, are single-family homes. Around four in five of those unit owners are individual investors.
After falling to a low of 75,000 units a year in late 2009 (a greater than 75 percent drop in activity from the peak of the market), new multifamily construction has reached a 306,000 rate on an annualized basis, a 49 percent improvement year-over-year.
The National Association of Home Builders forecasts another strong annual increase for multifamily construction projects in 2013. Multifamily starts should increase another 31 percent over 2012 to 335,000 total units for the year. And like growth in other parts of the housing sector, this additional development activity should add jobs to the construction sector, about 1,110 jobs for every 1,000 multifamily units built according to industry estimates.