Financial barriers preventing US home renters from buying, new research suggests

Taylor Scott International News

Many US home buyers can break even in less than two years if they buy a home instead of renting it, but financial barriers and preference are big factors in the decision to continue renting. A new report covering the fourth quarter of 2014 from US real estate data firm Zillow reveals that buyers break even on a home purchase in less than two years in 66% metro areas. It also says that some 20% of renters say they prefer to rent than buy with more than half, 53%, say financial limitations keep them from buying. Of renters surveyed by Zillow some 16% said they can't qualify for a home loan, 18% said they can't afford taxes, maintenance and other costs associated with home ownership, 13% said they don't have enough savings for a down payment and about a quarter said they struggle to pay their rent. According to the survey, 82% of renters are long term renters, and 57% are long term renters who have lived for a long time in the same home. Just 14% said they aren't staying long enough in the same place to buy. Zillow's survey sheds light on why some renters are not buying homes, despite historically low interest rates, prices that remain below peak levels in many areas and rising rents, however, some 20% of renters said they simply prefer to rent. ‘If the buy versus rent decision were about simple maths, we'd likely have millions more home buyers in the market, because the equation is tilted heavily in favour of buying,’ said Zillow chief economist Stan Humphries. ‘But no matter what the numbers say, buying a home is a huge commitment. Every day, Americans make decisions to buy or rent based on any number of personal dynamics, including preference, flexibility needs, family factors and, yes, financial considerations,’ he explained. ‘There is no right or wrong choice, and it's important that America's housing market maintains a number of affordable options for renters and buyers, no matter their preferences,’ he added. The report points out that over the last year, as home price appreciation has slowed down, the length of time it takes to break even on a home purchase grew slightly in most major metros. The breakeven analysis looks at how long it takes to come out ahead on a home purchase versus renting the same home, recouping the costs of buying, including taxes and maintenance. Among the top 35 metro areas, Dallas-Fort Worth had the lowest breakeven horizon, at 1.2 years. Indianapolis and Detroit were next at 1.3 years. The highest breakeven horizons were in Los Angeles, at 5.1 years, Washington D.C. at 4.2 and San Diego at 3.8 years. The national average is 1.9 years. Zillow's breakeven horizon incorporates all costs associated with buying and renting, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, insurance, taxes, utilities, maintenance, and renovation costs. The horizon also factors in home equity growth for buyers, and, for… Continue reading →

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