Buying a Home is Easier

Although some renters definitely are barred from buying by financial constraints, others are not buying simply because they think they can't, Ledebuhr says. "The perception many renters have of buying is far more arduous than reality," he adds.

A survey from the National Association of REALTORS® examines some of the assumptions renters make that are keeping some from entering the home buying market. "Survey of Homeowners and Renters: Key Findings" shows that the home buying obstacles renters feel are insurmountable can be overcome. The survey, taken in late 1991, covered 2,000 renters and 6,000 homeowners nationwide.

The majority of the renters surveyed agreed with the homeowners that home ownership is a good investment. However, nearly one-third of the renters said they are likely to always rent. Of that group, nearly one-half said they will be forced to rent permanently because they do not believe they will ever be capable of purchasing a home. The major reasons cited were the inability to qualify for a mortgage or to save for a down payment and the expectation of soaring home prices.

"The survey makes it clear that REALTORS® need to be using every opportunity to educate the public about buying a home," Ledebuhr says. "We want to help people understand each step of the home buying process," he notes.

Less than half the renters who plan to buy sometime in the future were aware of prevailing interest rates -- the lowest in nearly 20 years. The survey suggests renter ignorance of how affordable home financing has become given the current interest rate levels. Seventy-seven percent of the renters who plan to buy in the future said they expect their mortgage payments to be higher than their rental fees.

"When people find out just how low their payments will be, they are pleasantly surprised," Ledebuhr says. "In many cases, the monthly payment is no more than the rent they're already paying."

Additionally, rental fees in many areas could increase notably over the next few years, due to an overall slowdown in rental property development. This is likely to cause a shortage of units, which in turn will lead to hefty increases in rental fees, he notes.

"The same people who are scared of making monthly mortgage payments could be seeing their rents go up very soon," Ledebuhr says.

Thirty-four percent of the renters in the NAR survey said they decided against purchasing because they felt they could not save enough for a down payment. Of the renters who do plan to buy, 44 percent said they are saving for a down payment while 56 percent are not.

Interestingly, the survey found that it took homeowners a much shorter period to accumulate down payment funds than the time period anticipated by renters. For instance, more than 40 percent of the renters who are saving believe it will take them two to five years to save enough for a down payment. An additional 13 percent believe it will take at least five years, or possibly more. However, 47 percent of the first-time buyers in the survey reported that they saved only two years or less for down payment funds. Only 18 percent had to save five years or longer.

"Saving for a down payment is not completely painless. But, it doesn't take as long as many people think," Ledebuhr says. He notes that mortgage financing is available, from both government and private programs, that requires down payments of five percent or less. "REALTORS® are an excellent source of information on various financing programs," Ledebuhr says.

The NAR survey found that renters believe home prices will jump too high for them to be able to purchase in the future. The report noted that renters' expectations of home price increases were extremely high -- far higher, in fact, than those of homeowners surveyed. For instance, renters said they expect median home prices to increase 20 percent over the next three years, compared to 8 percent for homeowners. According to Ledebuhr, the home price predictions of the renters are not realistic. "Renters need to realize that the market has changed. In general, home prices will stay more in line with consumers' incomes than they did during the past decade," he says.

Three-quarters of the renters said they expect to have to make sacrifices to buy a home. However, the survey found that a lower percentage -- 40 percent -- of the people who bought actually made sacrifices. A vacation was the item most often given up by first-time buyers in order to purchase a home, followed by daily nonessentials. A new car was the third most-sacrificed item. "Buying a home might mean having to pass up a trip or an expensive car. But, it's well worth the sacrifice," Ledebuhr says. "When you pay rent, you're paying someone else's mortgage. When you own a home, each mortgage payment you make is an investment in your future."

The Greater Lansing Association of REALTORS® is one of more than 1,800 local boards and associations that comprise the National Association of REALTORS®. As "The Voice for Real Estate," NAR is the nation's largest trade association, representing nearly 750,000 members involved in all aspects of the real estate industry.