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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 A NA LY T I C S S E C O N DA R Y M A R K E T ANALYTICS THE LATEST Competitive Market Forces Buyers to Consider Options Homebuyers spend about 17 weeks shopping, while renters spend about 10 weeks searching for a residence. T he competitive home- buying market brought on by short inventory is causing potential buyers to keep their renting options open, according to the latest Zillow Group Report. Zillow found that on average renters spend about 10 weeks looking for a new place. Buyers spend about 17 weeks. Add to that the fact that at almost half of all buyers are first-time buyers, and 54 percent of buyers do not get the first house they bid on, and suddenly it forces house hunters to consider staying in rental proper - ties longer, Zillow reported. The times only get longer the lower the income of the buyer. Low-income renters spend on av - erage 12 weeks looking for a rental, Zillow found. And for many renters, buying is not a financial option. The median income of homebuyers is $87,500 a year, while renters make, on average, $37,500. "The line between renting and buying is blurry, and that's a sign of the times," said Zillow Chief Marketing Officer Jeremy Wacksman. "It's difficult and time- consuming to find a home to move to, especially in competitive hous - ing markets. Savvy shoppers have a Plan B, hoping to buy if it works out, but willing to sign a lease for a home if they don't make a deal by the time they need to move." According to Zillow, among those who bought a home in the last 12 months, 66 percent of millennials considered renting as well. Just over half (54 percent) of Generation X buyers considered renting, as did 32 percent of Baby Boomer buyers. Younger renters are also more flexible when looking for a home to rent—63 percent of Millennials and 59 percent of Generation X renters considered buying while looking for a rental. Among rent - ers over 50, most did not consider buying at all. Renters, once an afterthought to many in the housing industry, have become a significant pool. Affordability Reigns in Major Markets When accounting for wage gains and mortgage rates, homes are more affordable than they might appear. S ome recent reports have indicated that home price appreciation is outpacing wage gains, thus crimping affordability in the single-family housing mar - ket. One analysis found, how- ever, that when house prices are adjusted, many major markets in the country are more affordable than prices would suggest. First American Financial Corporation's Real House Price Index (RHPI) for August 2016, released in October, indicated that real house prices actually declined by 2.6 percent over the year and are still a distant 41 percent below their 2006 peak—and nearly 21 percent below their January 2000 level. The RHPI measures affordability of single- family properties in the United States when adjusted for impact of income and interest rate changes on con - sumer buying power. "Contrary to popular opinion, housing isn't getting more ex- pensive. In fact, on a purchasing- power adjusted basis, housing is becoming more affordable," said Mark Fleming, Chief Economist at First American. "Interest rate de - clines, combined with meaningful gains in incomes, have provided the consumer with greater buying power, which increases hous - ing affordability. The growth in consumer house-buying power is actually outpacing the increases in nominal prices driven by remarkably tight inventories." A big reason for the year-over- year decline in the RHPI was the drop in mortgage rates—the average 30-year FRM was nearly 50 basis points lower in August 2016 compared with August 2015 (3.44 percent compared to 3.91 percent). When unadjusted, national house prices are only 1.7 below their pre-bust 2007 level. "Until there is a meaningful increase in mortgage rates, likely starting later this year and con - tinuing into 2017, real house price levels will remain low in most major mar - kets," Fleming said. "At the moment, af- fordability is actually increasing in more markets than it is decreasing, includ - ing San Francisco, San Jose, New York, Washington and Boston. The con - ventional wisdom that these markets are over-valued does not account for the meaningful growth in consumer house-buying power across the majority of major metropolitan markets." The markets with the highest rate of improved affordability were Virginia Beach, Oklahoma City, San Francisco, and Milwaukee; each of those markets experi - enced a year-over-year decline of 4 percent or more in the RHPIs for those markets. Over the year, real house prices declined in 32 of the 43 metros First American tracks due to wage increases and low mortgage rates offsetting the unadjusted price appreciation. "Contrary to popular opinion, housing isn't getting more expensive." —Mark Fleming, Chief Economist, First American