Along with the desire to age in place comes the question of exactly where to age. Should you stay in your existing home or move to another? If you stay, should you renovate to improve comfort and safety and will those renovations add value to your home? If you move to a different location, should you purchase another home or is it more practical to rent?
No matter which option you’re leaning towards, you’ll need to factor in an evaluation of the current housing market along with emerging trends.
The Colton Housing Group recently conducted a national study among 3,005 homeowners and renters to better understand how Americans feel about today’s housing market and their aspirations for owning or renting a home in the future. The survey and six focus groups were commissioned by Hanley Wood, LLC, and its two main publications, BUILDER and REMODELING magazines.
The 70-question survey focused on attitudes towards the current housing market and problems encountered in the home buying process. Do Americans still view housing as a good investment? Is now a good or bad time to buy or remodel? How do consumers feel about obtaining a mortgage in today’s environment? Is homeownership still important? How do consumers compare owning with renting? Do consumer expectations vary among different age groups and socio-economic segments of the population?
The result of the survey paints an uncomfortable future for the nation’s housing market in the short term — a market where credit is tight and one where there is little urgency to buy now. It clearly identifies major bottlenecks in the mortgage market that are keeping many buyers on the sidelines and preventing any significant rebound in housing activity.
Over the long term, however, the survey tells a more positive story. Specifically, the survey findings show that the desire to own a home has not been derailed by the difficult economic times we're experiencing and that Americans generally understand the important role housing plays in creating new jobs, generating household wealth, and sustaining a long term economic recovery.
First, the question of rent or buy. While the dream of owning a home is certainly alive and well, renting is on the rise because for many it’s become the only option due to tough lending requirements. When asked what sort of housing they would look for if moving to a new location, 62% of the renters said they would have no choice but to rent again. In sharp contrast, only 10% of home-owning households said they would rent rather than buy another home. According to real estate website Trulia, buying was cheaper than renting in 74% of the country's 50 largest cities. In addition to a continuing decline in home prices, low interest rates have added a lot of weight to the buy side of the scale. Add in the tax perks of home ownership and for those who can afford it, it’s still a buyer's market.
So, what are the expectations for home prices during the next year? More than one-fourth (28%) of the homeowners expect to see some decline in prices in the year ahead, and one-third (33%) expect some increase in prices in their market area. Expectations vary from region to region. In the Northeast, 24% of the owners expect home prices to decline some in the year ahead, and 35% expect prices to increase. In the West and Midwest, about 30% of the owners expect prices to decline some, and another 30% expect home prices to rise. In the South, 27% of the owners are expecting prices to decline a bit more, and 34% expect prices to rise in the year ahead.
In response to the question, “Have changes in home prices influenced your home-buying decision?” 35% of owners and 38% of renters said yes. And while 50% of homeowners under the age of 35 reported that changes in home prices influenced their home buying decision, that percentage fell with age: 37% for owners in the 35-44 age group, 28% for 45- to 64-year olds, and 17% for owner aged 65 or older.
What seems to be sorely lacking in today’s market is not desire but a real sense of urgency to buy a home now. Two out of three homeowners and 23% of renters are comfortable with their current living arrangements. And both owners (40%) and renters (45%) cited “no urgency to buy now” as one of the principal reasons for staying out of the market.
Another trend reflected in the survey findings is the increasing number of people who are doubling-up with friends and family. More than one-third of the owner households and about one fourth of the renter households are doubling-up – young adults with parents, elderly parents with their adult children or grandchildren, unrelated adults living together. In order to project future housing demand, it is important to recognize the trend and understand why it’s occurring, whether it’s to cut expenses and ride out the recession, care for an aging parent, or for some other reason.
For those who question whether or not to renovate in order to remain in their current home, remodeling is becoming a more attractive option in today’s housing market. One out of five homeowners (22%) has recently completed a remodeling job or plans to remodel in the next two years instead of buying another home. Baby-boom generation homeowners are the most optimistic about the remodeling market, not a surprise given that homeowners over age 50 had a strong preference for staying in their current home throughout their retirement years. Among all respondents 50 or older, more than half (54%) said that they would stay in their current home for their entire retirement. Another 18% said they would stay in their current home first then buy another home later, and 10% said they would move to a different home (brand new or existing) before retiring or had already bought another home after retiring.
So all that said, what’s the bottom line? Home ownership remains an important part of the American experience and receives broad-based support from all age, ethnic, and income groups. And even though more than half of the homeowners surveyed experienced some decline in their home’s value over the past year, they still regard homeownership as a good, long term investment.