The real estate landscape currently has a big affordability issue. With low inventory, record-high home, and rental prices, and rising mortgage and interest rates, it’s tough out there for renters and buyers.
Zillow Group amasses a lot of data from its users, and their yearly reports on consumer housing trends give key insight into the current market and consumer behaviors.
According to Zillow Group’s 2018 Report, renters are affected by affordability issues. Renters are paying 29% of their monthly income on rent, and nearly half of renters couldn’t accommodate an unexpected $1,000 expense. 78% of renters who move experienced a rent increase before their move and two-thirds of that number moved because of the rent increase.
Today’s renters are typically single, but 79% live with others. Safety is their top priority when choosing a place to live, and living in a racially and ethnically diverse neighborhood is also important.
Lack of affordable inventory also affects home buyers and sellers. There aren’t enough affordable starter homes on the market, which means that first time buyers are competing with repeat buyers for the same homes. Buyers are also concerned with rising mortgage and interest rates. This affordability issue makes homeowners hesitant to sell, which further impacts the inventory. 45% of homeowners still live in the first home they purchased and the majority (83%) have no plans to sell in the next three years.
Millennials account for the largest group of home buyers at 42%. Many of them are new homeowners, so it's not surprising that three-quarters want agents who can guide them through the entire process. They are also more involved in the selling process and are more likely to take on some aspects themselves, such as promoting the home on real estate sites or photographing the home.
Renting your Home
While 96% of homeowners don’t rent out their home and don’t intend to, Zillow predicts a change to that trend. 24% of homebuyers say that it’s very or extremely important to be able to rent out a portion of their home, and 27% say it's very or extremely important to be able to rent out the entire home. Future homeowners seem likely to rent out part or all of their property.
Currently, those who have second properties are renting. 18% of homeowners have additional properties, and 38% of them rent out their said property.
This shift will hopefully help the inventory of rental properties.
Overall, both renters and homeowners are affected by a lack of affordable inventory. Without more inventory and comparative wage growth, the market is stagnating. People are staying in their first homes longer, and are more likely to move due to rent increases. At the same time, those who do go through with buying a home are immensely satisfied with the result.