Most renters want to become homeowners — 63% of renters surveyed by Zillow say they are confident they will qualify to buy a home (someday). But only 7% believe they will be able to buy in the next 12 months.
So what’s holding them back? According to the 10,000 people surveyed nationwide, the biggest obstacles are:
- saving for a down payment, cited by 68%;
- qualifying for a mortgage, cited by 53%;
- debt burden, cited by 50%;
- job security, cited by 39%;
- loss of mobility, cited by 20%; and;
- a lack of for sale inventory, cited by 11%. (Respondents were able to select more than one response)
These are national percentages. When looking at California, the down payment still ranks highest, with 67%-70% of respondents across the state naming it the biggest obstacle to homeownership.
However, the lack of inventory proves to be of larger concern to Californians than to residents of other states, cited by 16%-21% of residents in California’s largest metropolitan areas, compared to 11% of respondents nationwide.
Further, while 7% nationwide plan to buy in the next year, Californians are less optimistic. The percent of renters surveyed claiming to be able to buy in the next 12 months was just:
- 6% in San Jose;
- 5% in San Diego;
- 4% in Los Angeles; and
- 2% in San Francisco.
Solutions for California’s homeownership hurdles
Zillow’s survey on homeownership obstacles is especially relevant to California, which has the third-lowest homeownership rate in the nation (behind New York and Nevada), at 55% as of the first quarter (Q1) of 2017, according to the U.S. Census. For comparison, the national homeownership rate is 64%.
While Californians ranked homeownership obstacles consistently with the national average, respondents from California were more likely to identify more obstacles than the average American. In particular, Californians were about twice as likely to name the lack of inventory for sale as an obstacle to homeownership.
However, the inventory shortage identified is not actually about a lack of inventory. It’s about a lack of low-tier inventory.
The number of low-tier homes available for sale has declined in the past couple of years. The high-tier inventory is positively booming to the point of a surplus, but most first-time homebuyers are limited to shopping in the low-tier, and they continue to face steep competition for a shrinking pool of homes.
The long-term solution is more construction of low-tier homes. Builders are happy to oblige, but are held back by overly restrictive zoning regulations.
The other big obstacle to California homebuyers is saving — and saving for even a minimum 3% down payment can be difficult in California’s expensive housing market. Saving for the recommended 20% down payment is nigh on impossible for all but established homeowners.
Agents can be proactive by FARMing for tomorrow’s homebuyers today. Make it part of your monthly FARMing schedule to visit different apartment complexes in your area. Compile and distribute a collection of FARM letters for renters who may be thinking about homeownership, and guide them in the steps to become homebuyers. Some examples include: