Despite affordability challenges, California renters continue to hold homeownership in high regard and aspire to purchase a home eventually, according to a consumer survey recently released by the California Association of Realtors (C.A.R).
C.A.R.’s 2018 State of the California Consumer Survey, which examines the attitudes and behaviors of real estate consumers, found half of California renters rated homeownership as very important or extremely important, and that four out of five renters want to own a home someday.
Renters see the advantages of homeownership as more than just a roof over their heads. Twenty-one percent of renters said homeownership would provide them with a good long-term investment, while 19 percent said it would give them the freedom to do what they wanted with their home. Twelve percent of renters said a benefit of homeownership would be having the stability to plant roots.
“It’s encouraging that the majority of renters still believe buying a home is more than just a shelter over their heads,” said C.A.R. President Jared Martin. “While they may not be there yet, many renters are motivated to become homeowners as they recognize the many benefits.”
Nearly half (45 percent) of renters said they would purchase a home if they got a new job, a raise, or a promotion, while another 40 percent said they would be motivated to buy a home if they got married or were starting a family.
Renters who want to become homeowners someday are generally younger and more diverse. They have been renting a median of eight years and are at a median age of 35, with over half being millennials. Nearly three-fourths are non-white, with almost half being Hispanic. Renters who plan to buy have a median income of $40,000 and currently spend a median of 45 percent of their income on housing costs.
While many renters want to own a home, they either feel they are not in a financial position to become a homeowner or don’t have the financial knowledge. Only four in 10 renters are familiar with the credit and loan criteria needed to purchase a home. Further hindering renters from becoming homeowners, many renters also don’t know how much down payment is required, with 14 percent under the impression that more than 50 percent down payment is needed for a home purchase. Nearly 40 percent of California renters believe that more than 20 percent is required to become a homeowner. This misconception results in many renters delaying their home purchase or possibly even giving up on the dream of homeownership.
California renters pay a median monthly rent of $1,300, but the cost of renting varies across the state. Renters who live in the Bay Area pay the highest rent at a median of $1,800, while those in Southern California pay a median of $1,390. In general, renters spend 45 percent of their income on housing, with nearly seven in 10 spending more than the recommended 30 percent. The rent burden is especially heavy for the younger generations, with millennials spending half their income on rent.
California renters typically have lived in their current home a median of three years but have been renting for a total of nine years. While the majority are unsure about how much longer they plan to live in their current residence, one-fourth of renters plan to move next year. Nearly two-thirds of renters plan to rent after moving from their current residence, with older generations more likely to continue to rent than younger ones.
In a sign of optimism, three-fourths of those who plan to rent again said they want to own a home eventually.
The 2018 State of the California Consumer Survey was conducted online between May 9 and July 9, 2018, aiming to understand the process of home buying and selling, as well as the motivation behind renting and owning from the perspective of the California consumer. Surveys were sent to 470,803 consumers ages 18 and older in the state of California, resulting in 6,144 participants, a 1.3 percent response rate. The margin of error was ±1.2 percent at a 95 percent confidence interval. For the renters section, 1,856 respondents were renting a home in California at the time of survey participation.
Leading the way in California real estate for more than 110 years, the California Association of Realtors (www.car.org) is one of the largest state trade organizations in the United States, with more than 190,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.