The State of Modern Homeownership
Homeownership peaked at about 69% before the Great Recession, according to Embrace Home Loans. The current rate is closer to 65%.
“The dream is very much alive, but it’s changing [with regards to] what things have to happen in order for somebody to become a first-time homebuyer,” said Allen Jingst, SVP of Sales, LenderClose. He added that the homeownership rate among Baby Boomers is in the 70-75% range, while for millennials, that rate is closer to 50%.
Some have had to consider if the American Dream of previous generations is still desirable today, or if that dream has shifted, said Camillo Melchiorre, President, IndiSoft LLC.
“I think [the traditional American Dream] is still achievable; it’s just a little further out. You have to reach for it. It’s going to take longer for first-time homebuyers, particularly those with low and moderate income. That’s where the industry has to step up to have programs to support affordable mortgages.”
However, just as with previous generations, the prospective homeowner of today needs to plan and work with a good loan officer to make the dream a reality, Buege said.
“It can’t be done casually; you have to have a plan,” Buege said. “It has to be a disciplined plan. And you should be bringing along an experienced loan officer to help you develop that plan. If you step back from the noise, if you have that discipline, you truly can buy a home. It’s different headwinds today, though. And you know, I go back to when I bought my first home in the late ‘80s, I didn’t think it was ever going to be possible to buy a home, with the double-digit interest rates. We saved like mad; worked hard to make sure we had no credit card debt, drove cars that were six to seven years old, and we were able to buy into the American Dream.”
“I think the American Dream is alive,” concurred Tom Trott, Branch Manager, Embrace Home Loans. “It’s just more of a challenge now.”
Though there are low down payment programs, sellers are often looking for buyers who can bring mostly cash to the table so that there are no concerns about USDA, FHA, or VA inspections, Trotter added.
Other buyers are not only bringing all cash offers but also making offers with escalation clauses promising to match any higher offer, said Jon Tobias, SVP and Area Manager, Fairway Independent Mortgage.
Unlike a rental, an owned home can also become the center of a person’s financial wherewithal, some experts pointed out. With an owned property, a consumer starts building equity that can be used as a source of credit (once enough equity is built up), rather than relying on higher-rate credit cards or personal loans.
“Most Americans still have the vast majority of their net worth wrapped up in equity, and a home seems to be the best area of savings even with pensions going to the wayside,” said Peter Butler, Executive Managing Director of Digital Operations and Platforms, Wipro Opus.
This is an important consideration, Jingst said. While homes tend to appreciate in price (though maybe not at the recent high rates), autos and most other assets tend to lose value over time.
“There’s a lot of misinformation and misunderstanding on the value that people build in their home over time and how they’re potentially using that equity versus taking on additional credit card debt or even using it to start a small business,” Jingst said.
Owning a home also has tax advantages and stability—a property owner cannot evict a person or refuse to renew a lease—that an apartment does not have, Tobias added. However, some will opt to rent because they have been outbid on multiple properties.