Real estate: Qualified renters lack financial knowledge to purchase, others just choose not to own

While low affordability is the biggest obstacle most renters
face in becoming homeowners, a percentage of California renters who
can afford to buy a home lack the financial knowledge to purchase.
There is also a growing trend among high-income earners who would
rather rent than buy.

According to research findings by the California Association of
Realtors, 14 percent of California renters can afford to purchase a
home but are foregoing homeownership partly because they don’t
have the financial knowledge to do so. Of the nearly six million
California renters statewide, 826,000 could qualify to purchase a
median-priced home in the county in which they reside. Five in 10
who qualify to purchase a home are white (51.4 percent), 12 percent
are Asian, more than one in four is Hispanic (26.9 percent), and 6
percent are black.

The study found that a lack of financial literacy is one of the
biggest barriers preventing renters from becoming homeowners.
Nearly three-fourths (73 percent) believe a down payment of at
least 20 percent is required to purchase a home, and 72 percent are
unaware of loan programs that require less than 20 percent down
payment. Additionally, nearly seven in 10 (69 percent) would
purchase a home if they could put down a lower down payment.

“While many renters earn the income and have the credit
required to buy a home, they have misconceptions about what it
takes to become a homeowner, which is holding them back from buying
a home or causing them to give up on their American dream,” says
Jared Martin, president of the state Realtor group.

There are many down payment assistance programs offered by local
housing agencies. The Federal Housing Administration, U.S. Dept. of
Agriculture and the Veterans Administration have low down payment
programs.

“There are over 400 down payment assistance programs available
in California. The California Association of Realtors’ website at
www.car.org provides a Down Payment Resource Directory tool which
can assist prospective homebuyers learn about hundreds of programs
for down payments, closing costs and more,” says Alan Barbic,
president of the Silicon Valley Association of Realtors.

Meanwhile, another report released by RENTCafe.com found more
than 1.35 million households making $150,000 or more per year
became renters between 2007 and 2017 nationwide. That’s a 175
percent increase from renters within the same income bracket during
the span of the decade.

San Francisco and New York are the top cities with more
high-income renters than high-income homeowners. Based on the 2017
U.S. Census, in San Francisco 31 percent of the renter households
earn over 150K annually. San Jose has the second largest proportion
of high-income renters in the country, with 21 percent.

The shift in renter demographics could be due to a post-housing
crisis mentality or millennials preferring the flexibility of
renting. Some high-income renters prefer renting and reinvesting
the money they save from renting because they believe on average
their investments will outperform a home’s equity. Still others
feel even with their high income they cannot afford to own due to
the rising home prices and low savings.

“For a time home prices were accelerating so quickly that even
high-income earners were losing out on multiple offers and getting
discouraged. Many decided to wait it out and see where the market
was going in terms of home price and value,” explained Barbic.
“As we see prices continue to stabilize, more inventory in the
market, and interest rates relatively low, it is highly likely we
will see high-income earners return to the market this
spring.”

Information provided in this column is presented by the Realtor
members of the Silicon Valley Association of Realtors at
www.silvar.org. Send questions on any topic to
rmeily@silvar.org.

Source: FS – All – Interesting – News 2
Real estate: Qualified renters lack financial knowledge to purchase, others just choose not to own