There’s been a lot of talk in the news lately about Millennials delaying marriage, kids and homeownership. So it would be easy to think that perhaps the traditional American dream of owning home is slowly dying. In fact, the opposite is true: Research shows that homeownership remains a goal for the vast majority of American renters.
A recent survey by Freddie Mac revealed that 91% of renters believe homeownership is something of which to be proud. And, younger renters are making plans to buy homes in the near future. In fact, nearly half of renters in the 25-to-34 age bracket – and nearly 60% of renters ages 35 to 44 – indicate that they plan to buy a home in the next three years.
Benefits of Homeownership
These would-be buyers recognize the many benefits to homeownership, including the fact that homeownership is a primary source of net worth for many Americans and is an important step in accumulating personal financial assets over the long term.
In fact, 90% of the survey respondents said that being able to pass their home on to their children is one of the top three benefits of homeownership. Although property values have declined in many markets, Americans have more than $10.8 trillion of equity in their homes, and for most families, home equity represents the largest share of net worth.
Overcoming Obstacles to Homeownership
Qualifying for a mortgage and saving up for a downpayment remain primary obstacles to homeownership. To help address these concerns, Fannie Mae and Freddie Mac – through the Federal Housing Administration (FHA) – recently announced new low-downpayment mortgage programs geared primarily toward the first-time home buyer market.
These lenders will now offer mortgages with 3% downpayments, allowing more creditworthy borrowers who lack the funds for a large downpayment to obtain a home mortgage.
To ensure that the financing process goes smoothly, buyers should consider pre-qualifying for a mortgage and having a financing commitment in place before shopping for a new home. Buyers also may find that some home builders have arranged favorable financing for their customers or offer financial incentives.
Recent analysis by the National Association of Home Builders reveals that financial concerns remain front of mind for many first-time home buyers. In fact, Millennial home buyers – those in the 18-to-33 age bracket – are more likely to let financial reasons influence their house choice, while older generations consider the right size most often. And the homes Millennials buy are smaller, older and less expensive than homes bought by older generations.
That’s not surprising, since Millennials also are more likely than older generations to finance home purchases through current income than accumulated wealth, according to the NAHB analysis of the 2013 American Housing Survey.
So, while Millennials may be taking a little longer than previous generations to reach some of these traditional milestones, their goal of building their own American Dream remains strong.