Changing Demographics for Home Purchasers

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A pair of reports released on Tuesday offer some valuable insight for mortgage originators looking to build up their purchase business.

When it comes to loan prospects who are looking to finance a home purchase, the most-fertile group consists of those who currently live in a single-family property such as a house, town home or condominium.

In fact, a majority of renters who live in single-family homes say they are likely buy a home over the next three years versus just 36 percent of renters in multifamily properties.

Census data indicate that
around 15 million households rent a single-family residence and 25 million rent an apartment.

Those were some of the findings discussed in
the report Profile of Today’s Renter from Freddie Mac. Harris Poll was commissioned to survey 2,024 adults during June for the study.

One factor in the disparity is the degree of satisfaction with renting; more than two-thirds of renters who are most satisfied with renting
are likely to continue renting.

Among apartment dwellers, 67 percent indicate satisfaction compared to 60 percent for single-family properties.

The report indicated that the number of households with renters has increased for 10 consecutive years.

Another factor is rising rents, which
44 percent of those who have been renting for at least two years said they have experienced.

“If renters are making adjustments due to increases in their rent, 51 percent are spending less on essentials, 29 percent are contemplating getting a roommate and 20 percent say they need to move into a smaller rental property,” Freddie’s report stated. “Despite increases to their rent, 55 percent say they are making no changes to their spending plans and 49 percent say they like where they live and will stay in their current place.”

Among factors that are holding renters back from buying are freedom from home maintenance, more flexibility with location and immunity from home-price declines.

The second report, Housing Demand:
Demographics and the Numbers Behind the Coming Multi-Million Increase in Households
, was published by the Mortgage Bankers Association.

The trade group predicts that
between 13.9 and 15.9 million additional households will be formed by 2024.

If the projection materializes, the next decade is expected to be
one of the strongest in U.S. history.

“Household formation has been depressed in recent years by a long, jobless recovery and by a lull in the growth of the working age population,” MBA Vice President of Research and Economics Lynn Fisher said in a written statement. “Improving employment markets will build on major demographic trends — including maturing of baby boomers, Hispanics and millennials — to create strong growth in both owner and rental housing markets over the next decade.”

MBA Vice President of Commercial Real Estate Research
Jamie Woodwell added that younger consumers are spending more time in school and delaying major life events like getting married and having children.

“As millennials age and create more housing demand, these long-term social trends will mix with demographic changes and the waning hang-over from the Great Recession with a net outcome of increased demand for housing,” Woodwell said.

Baby boomer households, those whose occupants are more than 60 years old, are projected to drive household growth over the next decade, rising by more than 12 million.

Millennials are expected to help boost the number of households of 18-to-44-year-olds by as much as 5 million  — making them a key component of growth.

Mortgage Expert

Mortgage Daily Staff



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