Despite Obstacles, Dream of Homeownership Still Thrives in California
California has its share of housing challenges. Whether it’s affordability or availability, finding a home is often a difficult exercise.
Yet, despite these hurdles, renters in California continue to aspire to become full-fledged homeowners and remain relatively optimistic they will eventually attain that status.
According to a recent study by the California Association of REALTORS® (CAR), 80 percent of renters in the Golden State hope to own a home someday.
From that cohort, 21 percent want to own a home because it’s a good long-term investment, 19 percent said owning a home would give them the freedom to do what they wanted with their property and 12 percent said owning a home would provide stability and allow them to become rooted to a specific community or neighborhood.
“It’s encouraging that the majority of renters still believe buying a home is more than just a shelter over their heads,” CAR President Jared Martin said. “While they may not be there yet, many renters are motivated to become homeowners as they recognize the many benefits.”
Who Are California’s Renters?
The study showed that the typical California renter is 36-years-old, unmarried and has a median income of $40,000.
Millennials (22-36) make up about 50 percent of California renters while those in Generation-X (37-54) make up 26 percent. Twenty percent of renters are Baby Boomers (55-75) and the final three percent are from the Greatest Generation (76+).
Nearly 75 percent of all California renters are non-whites, with roughly 50 percent identifying as Hispanic.
About 45 percent of those polled said they would purchase a home if they got a raise or promotion at their current job or if they switched their employment. An additional 40 percent said that getting married or starting a family would be a motivation to buy a new home.
California renters have been renting homes for an average of nine years with a median of three years in their current rental.
While most renters aren’t sure about how much longer they plan to rent, either in their current home or other homes, 25 percent said they planned to move in 2019 with nearly two-thirds saying they planned to rent again after moving.
But that left a total of more than one-third of those renters who had a positive outlook for this coming year and would be looking to buy a home.
In addition, 75 percent of those who said they were planning to rent again remained optimistic and said they would like to own a home eventually.
On the negative side, the study showed that many renters feel they are not financially stable enough or aren’t financially educated enough to become homeowners.
Less than half (40 percent) said they were familiar with the credit and loan criteria required to purchase a home.
On top of that, many renters have no idea how much money is needed for a down payment on a home. withFour-in-10 renters believe that more than 20 percent is required for a down payment and 14 percent of renters believe more than half of the sale price of a home is needed for a down payment to complete a purchase.
Misconceptions like these do tend to stunt the pursuit of home ownership for many renters.
The median rent in California is $1,300 per month, but the cost varies wildly across the state. Most renters in California spend almost half of their income on housing costs seven-in-10 spending more than the recommended 30 percent and millennials spending 50 percent or more.
Homeownership is a long-term investment, and as such, often seems daunting to those who don’t think they have the wherewithal to make it their reality.
However, current renters might have a different outlook and be able to start to reap some benefits associated with homeownership, if they were more financially literate about the homebuying process.