Most Renters Unable to Afford a Home Purchase

Financial hardships are preventing most renters from entering the real estate market, a recent Freddie Mac survey found, but new low-down-payment programs could help some of them unlock purchasing power and become first-time homebuyers.

According to poll results, 45 percent of U.S. renters said they live from paycheck to paycheck, while another 17 percent reported an inability to pay for basic necessities. And although 91 percent of renters believe that homeownership is a source of pride, just 39 percent said that they expect to purchase a home over the next three years.

Renters who plan to get in the game tend to be younger, with 47 percent of those in the 25-to-34 age bracket foreseeing a purchase by 2017. Generation Xers seemed even more certain that homeownership is in their future, with 58 percent of those aged 35 to 44 responding that they expect to buy a property within the next three years. Renters who haven’t bought a home by the age of 45 were unlikely to do so, Freddie Mac noted.

In a statement accompanying the survey results, Freddie Mac Multifamily Executive Vice President David Brickman said that an inability to afford a down payment is preventing some renters from buying, but the California Association of Realtors believes that new lending programs could help turn the tide.

Last week, both Freddie Mac and Fannie Mae unveiled programs that would allow qualified first-time buyers to obtain a loan with as little as a 3 percent down payment.

“Our goal is to help additional qualified borrowers gain access to mortgages,” Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets, said in a statement.

CAR commended the programs, saying that increased access to credit would greatly benefit the state’s first-time buyers.

“Saving enough money for a down payment is the biggest hurdle for most first-time home buyers, but this program will help remove that barrier, and at the same time, lenders can be assured they are providing a safe, affordable loan to creditworthy borrowers,”CAR President Chris Kutzkey said in a press release.

Still, not all renters want the responsibilities and commitments that come with homeownership, according to Freddie Mac. Freedom from home-maintenance chores and expenses is the main advantage of renting, 78 percent of respondents answered, while 68 percent said that renting allows for greater flexibility in terms of location.

And the country’s recent recession and housing collapse is still very much top of mind, with 66 percent of those polled responding that continuing to rent would protect them against future home price declines.

(Photo: Flickr/NoHo Damon)

First-Time Homebuyer Activity Reaches Three-Decade Low

A combination of factors is keeping many younger Americans out of the real estate market, pushing the level of first-time homebuyer activity to its lowest level in more than 25 years.

The National Association of Realtors’annual Profile of Home Buyers and Sellersfound that first-time buyers accounted for 33 percent of purchases in its most recent survey, down 5 percent from one year earlier. First-time homebuyer activity hasn’t been this low since 1987, when NAR measured it at 30 percent.

Since NAR began conducting the yearly poll in 1981, the average level of first-time buyer activity is 40 percent.

NAR Chief Economist Lawrence Yun attributed the decline to a number of hurdles that younger homebuyers face, including student debt, flat wage growth, and rising rents. Yun also partially blamed a lack of homes for sale on the market – a particular issue here in the Bay Area – along with a handful of other factors.

“Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions, and high mortgage insurance premiums,” Yun said.

And for the first-time buyers across the country who were able to successfully purchase a home, about one-quarter required financial assistance from friends or family members, survey results found. Nearly all younger buyers — 97 percent — financed the purchase, compared with about two-thirds of buyers age 65 and over.

Across the country, the average first-time buyer paid $169,000 for their home, but here in the Bay Area the barrier to entry is much higher. NAR’s most recent monthly housing summary put the median list price for a home in the San Francisco metro area at $949,000 in September, making it the country’s priciest housing market. The San Jose metro area was the third most expensive in the U.S., with a median list price of $718,000.

Younger Bay Area home shoppers also face competition from all-cash buyers and affluent international investors. First-time buyers here must further contend with some of the highest rents in the U.S., which make it more difficult to save money for a down payment.

So what can first-time Bay Area homebuyers do to give themselves a leg up? Two of Pacific Union’s top real estate professionals in Silicon Valley recently gave SFGate a few tips, including getting prequalified for a loan and maintaining a focused attitude.

They also noted that while many first-time buyers initially find homes online, employing the services of a knowledgeable and dedicated real estate professional plays a critical role in a successful transaction.

(Photo: Flickr/Rob Cruickshank)