SEATTLE—According to the first Zillow Housing Aspirations Report, almost 70 percent of renters surveyed cite the down payment as a greater barrier to homeownership than debt, job security, qualifying for a mortgage, not being in a position to settle down and low housing inventory. Just over half of renters cite qualifying for a mortgage as a barrier to homeownership, while half say debt is holding them back. Almost 40 percent of renters say job security is keeping them from buying. Making a monthly mortgage payment is cheaper than a monthly rent payment in all but two of the 35 largest U.S. metros, but first renters need to save enough money for a down payment.
The Zillow Housing Aspirations Report, a semi-annual survey sponsored by Zillow and conducted by IPSOS, asks 10,000 renters and homeowners in 20 metros across the country about their views on homeownership and their personal housing expectations going forward. Highlights from the report include:
- Over half (63 percent) of renters are confident they will be able to afford a home someday, with 25 percent planning on buying in the next three to five years.
- Millennial renters are more confident than any other generation that they will be able to afford a home someday, with 34 percent planning on buying in the next three to five years. Almost a quarter (22 percent) report planning to buy in one to two years, while 2 percent of millennial renters said they never plan to buy a home.
- The majority of respondents (66 percent) believe owning a home is necessary to live the American Dream, and 72 percent believe owning a home increases your standing in the local community—millennials believe these two statements more than any other generation.
“With home values close to record highs, it’s no surprise renters are concerned about coming up with enough money to buy a home,” says Zillow Chief Economist Dr. Svenja Gudell. “Rising rents are also a factor—it’s extremely difficult to save when you’re paying record-high rents. While it is possible to put down as little as 3 percent on a home, the trade-off is a higher interest rate and costly private mortgage insurance; a trade-off that may make sense for some buyers. But with interest rates rising in 2017, it’s important to remember that a lower interest rate can save buyers thousands of dollars over the life of their loan.”
San Diego, Los Angeles and San Jose, California, had the greatest share of renters say affording the down payment is the No. 1 barrier to owning, at over 72 percent. Women (72 percent) were more likely than men (62 percent) to select the down payment as the top barrier to homeownership. One-third of buyers used more than one source of funds for their down payment, including gifts and loans from family, according to the Zillow Group Report on Consumer Housing Trends. Over half of buyers reported saving by setting aside a little money at a time.
See the breakdown of each of the 20 metropolitan areas and the top three perceived barriers for homeownership among renters there by clicking here.