MReport February 2019

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TH E M R EP O RT | 53 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Achieving Homeownership Thirtysomethings who take the homebuying plunge are reaping the benefits of owning over renting. H ere's a familiar story. Young American homebuyers want to purchase a home but challenges such as affording a down payment and getting ap- proved for a mortgage because of low credit scores are holding them back. But, a new survey by TD Bank revealed that those in this age- group who went ahead and took the plunge are reaping the benefits of homeownership. The survey conducted by TD Bank targeted 30 year-olds in the U.S. to understand their opinion about renting versus owning a home, with 69 percent of the respondents having an annual household income of less than $75,000 and the balance 31 percent earning more than $75,000 per year. While 48 percent of the respon- dents surveyed owned a home, 43 percent rented and the survey revealed that those with incomes over $75,000 were more likely to own their home. One of the key reasons, the survey revealed that these young Americans took the plunge was to achieve their dream of home- ownership, with 46 percent of the homeowners citing this as a rea- son. These homeowners also said that they recognized the benefits of owning a home compared to renting and cited savings on rental payments and building equity as some of the key reasons to buy. Twenty-two percent of the homeowners said that they chose to buy over renting because their mortgage payment was the same or cheaper than the rent they would have paid. While 51 percent of males said they bought because they wanted to become a homeowner, the survey found that females tended to be more practical, choosing to buy a home because the costs were similar to those of renting. The survey said that among those who bought a home before they turned 30, 26 percent said they saved the money, 23 percent had help from their family, 20 percent went with a low down payment, and 15 percent bought it with someone else. "In an effort to avoid the hous- ing pitfalls they witnessed their parents weather, many are missing out on an opportunity to build equity and invest in property," said Rick Bechtel, US Head of Mortgage at TD Bank. "While the financial aspect remains daunting to many prospective young buyers, today's lenders are working to make homebuying more afford- able." When asked about the attitude of their peers who were still on the fence on purchasing a home, 40 percent of homeowners said they believed that their peers had not made the leap to buy because of the idea that they couldn't af- ford a home. Of the renters, who were asked the same question 32 percent said they rented because they couldn't afford the down payment to buy a home, while 30 percent said they liked the flex- ibility of renting. Price Appreciation vs. Housing Demand How does the current state of U.S. housing compare to the peak of the last cycle? T he housing market might experience a downturn, but it won't affect homeownership as much as the last housing crisis did, according to a study titled "Where Are We Now with Housing: A Report," by the Florida Atlantic University College of Business. The study investigated and compared the current status of U.S. housing at the national level with that of housing at the peak of the last cycle in July 2006. It revealed that while national housing prices were slightly overheated, residential real estate markets were experienc- ing minimal downward pressure on the demand for homeownership. "Understanding where housing stands today relative to the last cycle's peak creates more in- formed real estate consumers and perhaps a less bumpy ride this time around as the nation enters another housing cycle peak," said Ken Johnson, the author of the study and co-author of the Beracha, Hardin & Johnson Buy vs. Rent Index (BH&J). To compare home prices and their impact on demand, the study investigated scores of the CoreLogic Case-Shiller Home Price Index and the BH&J. It found that housing prices were at 7.3 percent above their long-term pricing trend compared to 31 percent at the peak of the last housing cycle. In terms of downward pressure on housing demand, the study found that at the end of the last cycle the BH&J Index indicated an extreme downward pressure on homeownership with a score of 1.00. Comparatively, this time around, the index reflected a score of 0.039 suggesting only minimal pressure on homeownership demand. "It looks like we're in for more of a very high tide, as opposed to a tsunami, as residential prices peak in this latest cycle," Johnson said. "At a minimum, we can ex- pect flatter housing price growth. At worst, we could experience price declines slightly below the long-term pricing trend." 2019 FIVE STAR CONFERENCE AND EXPO | HYATT REGENCY | DALLAS, TEXAS REGISTER AT FIVESTARCONFERENCE.COM SAVE THE DATE SEPTEMBER 23-25, 2019 Now in its 16th year, the Five Star Conference is a premier mortgage and real estate event attended by thousands of industry professionals. Don't miss out on the lowest registration prices of the season—act today to reserve your opportunity to contribute, network, and succeed. For more information, please call 214.525.6700 or email HOSTING SPONSOR LEADERSHIP SPONSORS STAR SPONSORS TM

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