Home Sweet Home: Post-Recession, Americans Still Pine for Their Own Castle
Americans still view homeownership as an important life event, but just 14% say it’s of primary importance, according to a survey by ReportLinker. This is slightly lower than last year when 19% of respondents to ReportLinker’s 2016 housing survey ranked it first.
In 2017, the goal of homeownership ranks fourth among American priorities, one notch below last year’s ranking. Education, which had a 10% increase over last year, jumped into the top slot, while “achieving career goals” and “getting married” ranked second and third, according to ReportLinker.
Homeownership, though, has long had a significant place in the American dream, and it still figures prominently even after the 2008 recession made it more challenging to achieve this goal. Despite its lower overall ranking, home ownership is the clear winner as a long-term financial goal for Americans, with 54% saying it was their primary long-term financial objective – an 11% increase from last year.
In fact, 81% say homeownership is the best long-term investment a person can make.
The investment advantage is one of the forces driving Millennials’ interest in buying. In the first quarter of this year, the number of new-owner households was double that of new-renter households, an indication the younger generation is moving into the buyers’ market.
A major challenge for would-be homeowners is the lack of housing inventory. The US is in the midst of a housing shortage, largely because members of the Millennial generation want to live closer to urban areas – and the numerous restaurants, attractions and short commute times they offer. In response, real estate builders have focused on urban housing rather than the less expensive suburbs, leading to a decline in overall housing starts and a focus on higher-priced city homes. But as Millennials marry and look to leave their rentals behind, starter homes are beginning to make a comeback and builders are now shifting their focus from luxury homes to lower price points that first-time buyers can afford. They’re also expanding beyond urban areas into the exurbs where land is cheaper.
Lest we fear another housing construction boom similar to that of the mid-2000’s, builders such as Meritage Homes Corp. say they’re only slightly increasing their construction rate to avoid a replay of the surplus. Other major players such as Toll Brothers are building homes at lower price points to cater to Millennials. Townhouses and smaller homes on narrow lots are also becoming more popular to fit this new demand.
Meanwhile, there is a linear relationship between age and home ownership, with Americans progressing from living with friends and relatives rent-free to renting on their own to eventual home ownership.
Among homeowners, 31% have a mortgage, while 15% own their home outright. Those most likely to be mortgage free are those 55 and over (36%), while half of those aged 35 to 44 are more likely to still be chipping away at their payments.
More than a quarter of respondents to ReportLinker’s survey say they rent from a private landlord. Renting is especially common among older Millennials aged 25 to 34 (44%), while four in 10 young Millennials (age 18-23) say they stay with friends or family for free.
One rental trend gaining popularity among young, urban professionals is co-living. Companies such as HubHaus will do the leg-work for the time-crunched urban Millennials, finding them quality homes with furnished communal areas and handling set up of utilities. Urban professionals don’t have to spend time hunting for the right place to live, and the communal approach enables them to meet like-minded neighbors. It’s a set up that supports their renter mindset while providing a social element.
For those who prefer to own, most Americans say they feel their dream house is affordable as seven out of 10 homeowners say their home is the right size for them, ReportLinker says. Another 18% say their house is too small, while10% believe it’s too big.
But there’s more to home happiness than size.
Every homeowner must deal with the home repair and improvement projects. The list of ‘to do’s’ can seem never-ending, and for many, they’re a regular concern. Americans cite maintenance and repair as their top priority 42% of the time, according to ReportLinker, with those 35 and older mentioning it 45% of the time. They also cite the desire to remodel for comfort (21% of mentions) and for better style (19% of mentions). While energy conservation is a focus for some, just 16% said this was their top priority.
As for the type of project undertaken, respondents mentioned basic maintenance most frequently (67% of mentions). When they do remodel, a third of homeowners are ready to spend up to 10% of their home’s value to make over their kitchen, but 44% are only willing to spend 5% to redo a bathroom.
However, over a third of owners are willing to spend as much as they can afford to remodel these rooms. Women, in particular, are ready to write a blank check. More than four in 10 said they’d be willing to spend as much as possible remodeling their kitchen or bathroom.
While that dream kitchen and bathroom may be on your wish list, homeowners are wise to focus most of their projects on maintenance. A recent study showed that owners are more likely to recoup the money spent on maintenance projects like a new roof and furnace than on remodeling a kitchen with high-end appliances. A leaky roof or water damage is more likely to turn off a buyer than an outdated kitchen or bathroom.
This is especially good advice for older generations who are looking to downsize and cash out on their investment with minimal expense. It’s a sellers’ market, and as more Millennial buyers enter the market, homeowners are likely to benefit from higher prices.