Demand for single family homes in the US rising
Over three quarters of households in the US would purchase a single family home if they were to buy in the next six months, and 79% of renters would choose to buy outside of an urban area, new research shows.
The latest quarterly consumer survey from the National Association of Realtors also shows that confidence about now being a good time to buy is waning amongst renters, particularly in the West where prices have solidly risen.
Some 85% of current home owners and 75% of renters said they would purchase a single family home, while only 15% of home owners and 21% of renters said that would buy in an urban area.
Lawrence Yun, NAR chief economist, said that the survey findings call attention to the glaring need for more supply of single family homes. ‘The American Dream for most consumers is not a cramped, 500 square foot condo in the middle of the city, but instead a larger home within close proximity to the jobs and entertainment an urban area provides,’ he explained.
‘While this is not a new discovery, supply and demand imbalances and unhealthy levels of price growth in several metro areas have made buying an affordable home an onerous task for far too many first time buyers and middle class families,’ he added.
According to Yun, it’s time for home builders to double their focus on constructing single family homes. With millennials increasingly buying in the suburbs tight inventory and affordability concerns will likely worsen without significant headways made in housing starts in relation to job creation.
The survey found that 82% of home owners believe now is a good time to buy, no change from the previous survey in December 2015 but the number of renters thinking the same fell from 68% to 62%.
‘A high number of home owners are expressing that it’s a good time to buy and this sentiment is no doubt being fuelled by the $4.4 trillion in housing equity accumulation in the past three years,’ said Yun.
‘On the other hand, accelerating home prices and the perceived difficulty in obtaining a mortgage appears to be tugging at the confidence of renters,’ he pointed out.
Overall, respondents over the age of 65, those living in the Midwest and those with incomes over $100,000 were the most optimistic about buying now.
Among current home owners 56% thought it is a good time to sell compared to 61% in the fourth quarter of 2015. Amidst steep price increases and tight supply, respondents in the West were the most likely to think now is a good time to sell, while also being the least likely to think now is a good time to buy.
Among all households in the survey, less than half believe the economy is improving at 48%, down from 50% in last quarter’s survey. Renters, those living in urban areas and respondents with lower incomes were the most optimistic.
Across all age groups, when asked about their future buying preferences, survey responses were closely tied to each generation’s typical lifestyle, with younger buyers being more likely to consider buying a single family home. Not surprisingly, renters and younger buyers would for the most part purchase larger homes, whereas older buyers would purchase similar or smaller sized homes.
Highlighting the apparent appetite for some older households to downsize and live in the city, respondents over the age of 65 were the most likely to consider a condo and nearly as likely as respondents under the age of 35 to consider purchasing in an urban area.
Most respondents indicated their preference to stay in a similar area to their current living situation if they were to buy in the next six months. Over two thirds of those living in rural areas and 75% of those living in suburban areas would buy in a similar area.
Only those living in an urban area would be more likely to move elsewhere, with a suburban area within 20 miles of the city being the most frequent choice of urban buyers moving to another type of area.