|By Marketwired .||
|June 18, 2014 06:00 AM EDT||
CHICAGO, IL -- (Marketwired) -- 06/18/14 --
- Survey of Americans finds 74 percent of 18-34 year olds plan to buy a home in the next five years, with nearly a third (32 percent) saying they will buy in next 12 months
- Current homeowners say main motive to own a home is to have something to call their own
- BMO Economics: student debt causing some pause when it comes to young homeownership
According to new report issued today by BMO Harris Bank, three quarters of millennials in the U.S. plan to purchase a home in the next five years, signalling a high level of confidence in the housing market.
The study showed likelihood to buy is highest among millennials, and increases with a longer timeline for purchase:
---------------------------------------------------------------------------- Timeline for Purchase Ages 18-34 Ages 35-44 Ages 45-54 Ages 55-64 Ages 65+ ---------------------------------------------------------------------------- Next 12 months 32% 21% 6% 7% 5% ---------------------------------------------------------------------------- Next 2 Years 45% 37% 18% 13% 11% ---------------------------------------------------------------------------- Next 5 Years 74% 62% 35% 31% 19% ----------------------------------------------------------------------------
Sixteen percent of Americans buying in the next five years are first-time home buyers.
"We're seeing a fair amount of confidence in the housing market, which is encouraging news and in line with the strong home buying season we've experienced to date," said Kevin Christopher, Head of Mortgage Sales, BMO Harris Bank. "For many in the under 35 age range, this may be their first home. With such a significant investment, it's always a good idea to lay out a proper budget, and stress test it for rising rates, to ensure you're financially prepared."
According to the study, two thirds of respondents currently own and one third rent. The top three reasons homeowners cited for owning rather than renting were having somewhere to call their own (67 percent), long-term investment (64 percent) and more stability and certainty (62 percent). The top three reasons people cited for renting rather than owning were financial instability (59 percent), less upkeep (30 percent) and difficulty finding affordable homes in the right location (27 percent). Some rented for financial reasons -- 12 percent said it was less expensive in the long run, and 11 percent said they were concerned about home prices falling.
"While the housing market is on the upswing, the record level of student debt carried by young Americans does pose a challenge to many in their 20s and 30s hoping to purchase their first home," said Michael Gregory, Head of U.S. Economics, BMO Capital Markets. "Student debt levels have more than doubled in the last seven years to $1.1 trillion. The financial burden means renters are delaying entering the purchasing market, which has a trickle-down effect on the overall housing recovery."
According to BMO Economics, U.S. home prices are still rising. The S&P/Case-Shiller metric is up 12.4 percent year-over-year during the past 12 months (ending March) and 12.8 percent in the first quarter of 2014. Although the annual pace is slightly slower than the post-recession 13.7 percent year-over-year peak hit last autumn (and a cooling is welcome at this point given affordability considerations), prices are still up a cumulative 25 percent from their January 2012 lows.
The study also found:
- House ownership is high, with 95 percent of those who own their primary residence saying it is a house, and only 5 percent saying it's a condo
- Just over a tenth (12 percent) of renters say they prefer to rent and never plan to buy
- A third (32 percent) of current renters said would like to buy but are not able to afford it
Survey results cited in this report are from a Pollara survey commissioned by BMO Harris Bank using interviews with an online sample of 2,500 Americans conducted between April 1st and 7th, 2014. The margin of error for a probability sample of 2,500 is +/- 1.96%, and 250 is +/- 6.2% 19 times out of 20.
For more trends, tips and tools for your financial future, visit bmoharris.com/YourFinancialLife.
About BMO Harris Bank
BMO Harris Bank provides a broad range of personal banking products and solutions through more than 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. For more information about BMO Harris Bank, go to the company fact sheet. Banking products and services are provided by BMO Harris Bank N.A. and are subject to bank or credit approval. BMO Harris® and BMO Harris Bank® are trade names used by BMO Harris Bank N.A. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with approximately 1,600 branches, and CDN $582 billion in assets (as of April 30, 2014).
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