WASHINGTON, Dec. 16, 2010 /PRNewswire/ -- Fannie Mae (OTC Bulletin Board: FNMA) today released the second installment of its 2010 Own-Rent Analysis, with highlights of the last two of the report's four major themes: Renting and Owning Behaviors by Race, Ethnicity, and Immigration Status and Economics of Owning and Renting Through the Cycle and Across Geographies. Highlights of the first two themes were announced last week, focusing on the finding that despite the housing crisis, Americans maintain a strong desire to own a home. Today's highlights explore attitudes and behaviors toward homeownership among ethnic groups and immigrants and the economics of owning and renting over time and by geographic region.
According to the study, all racial and ethnic groups polled, as well as immigrants, strongly aspire to own a home, despite current disparities in homeownership rates for these groups. Additionally, if personal finances improve for these groups as they continue to grow in number, homeownership rate disparities may not persist. However, the analysis also found that if homeownership rates by race and ethnicity remained constant at 2009 levels, projected homeownership would decline fairly steadily until 2050.
"Our study gives us reason to believe that the homeownership rates for ethnic groups and immigrants will be higher than indicated solely by the projected growth of the racial and demographic population," said Doug Duncan, Fannie Mae Vice President and Chief Economist. "We routinely conduct research like this to help us better understand the views of homeowners and renters across specific demographics so that we can provide the best support possible for the market."
On the geographic front, residents of Cleveland, Ohio; Phoenix, Arizona; and Seattle, Washington were surveyed to measure attitudes and behavior differences in cities with distinct real estate market characteristics. The analysis found that despite dramatically differing housing markets and percentages of underwater and delinquent mortgage borrowers, residents of all three cities have similar, positive views about the benefits of owning for both financial and lifestyle reasons.
The Fannie Mae 2010 Own-Rent Analysis is based on extensive primary research with homeowners and renters (including focus groups and a quantitative survey), U.S. Census Bureau data, and micro- and macro- economic parameters, and explores the factors influencing consumers' decisions to buy or rent a home. The analysis compares current consumer actions, attitudes, and financial considerations with historical consumer behaviors, market experience, and economic conditions. The results of the study were published in a series of themed reports that cut the data across consumer life stage; ethnicity/race/immigration status; and demographic, geographic, housing, and economic status. The reports are available on www.fanniemae.com.
Overview of Key Findings
According to U.S. Census Bureau forecasts, the population is predicted to become more racially and ethnically diverse, and most population growth will come from immigrants and their descendants.
- The U.S. population is projected to grow by nearly 130 million people over the next 40 years. Much of this growth will be driven by immigrants and their descendants. By 2050, non-Hispanic whites are projected to compose 46 percent of the population, compared with 65 percent today.
Strong homeownership aspirations exist across races, ethnicities, and immigrant groups, indicating that current disparities in homeownership rates may not persist in the future, particularly if personal finances improve.
- For first generation immigrants and for minorities, the percentages of survey respondents intending to own a home if they were to move in the future are higher than current ownership rates.
- First generation immigrants and minorities are more likely to be living in multifamily housing and more likely to want to own these units.
- Among all sub-groups surveyed, African Americans are most likely to rent their homes; 52 percent of African Americans rent, compared to 41 percent of first-generation immigrants, 38 percent of Hispanics, and 25 percent of whites.
- If current racial and ethnic homeownership rates remain unchanged, overall homeownership will decrease in the U.S. by four percentage points by 2050, as immigrants and ethnic groups currently have lower homeownership rates than non-immigrants and whites.
Homeownership rates converge regardless of race, ethnicity, and immigration status among people with higher incomes. And for immigrants, homeownership also increases with tenure in the U.S.
- According to U.S. Census Bureau data, among ethnic groups, non-Hispanic whites currently have the highest rate of homeownership at 76 percent, compared to 51 percent for white Hispanics, 47 percents for non-Hispanic blacks, and 34 percent for black Hispanics.
- Among survey respondents, whites have a homeownership rate of 71 percent, compared to 44 percent for blacks and 53 percent for Hispanics. However, for blacks whose annual family income is between $50,000 and $99,000, the ownership rate soars to 60 percent (compared to 79 percent of whites) and for Hispanics, 63 percent.
- Immigrants also tend to have lower homeownership rates but the gap quickly narrows over time as tenure in the U.S. increases. Within 30 years of arrival in the U.S., immigrant homeownership rates catch up with overall average U.S. homeownership rates.
While overall homeownership rates are fairly similar across Cleveland, Phoenix, and Seattle, home prices and unemployment rates varied, contributing to very distinct real estate markets.
- Overall ownership rates are fairly similar across the three cities with the highest rate of ownership in Phoenix (66 percent) - although with more mortgages than the other cities (49 percent in Phoenix versus 37 percent in Cleveland and 44 percent in Seattle). Seattle had the largest percentage of renters (35 percent) among the three cities (33 percent in Cleveland and 31 percent in Phoenix).
- Home price experience in the three cities has varied. Phoenix experienced the biggest house price bust, while prices have stayed at a fairly constant low level in Cleveland. Seattle has the highest prices and experienced a moderate drop during the crisis.
- The unemployment rate has generally been highest in Cleveland and lowest in Phoenix.
- The serious delinquency rate is highest in Phoenix, at 15.8 percent, and lowest in Seattle, at 7.7 percent.
- Phoenix has the highest rate of self-reported underwater mortgage borrowers - 41 percent of all mortgage borrowers in Phoenix say the amount they owe on their mortgage is at least 5 percent more than the current value of their home (28 percent of mortgage borrowers in Seattle and 27 percent in Cleveland).
Despite these differing housing market histories, residents of all three cities have similar, positive views about the benefits of owning for both financial and lifestyle reasons:
- For example, residents of Phoenix are more likely (76 percent) to say that given their current household finances, they are better off owning than residents of Seattle (69 percent) despite a far greater percentage of underwater borrowers (41 percent in Phoenix versus 28 percent in Seattle.)
- Similarly, given current household finances, 72 percent in Cleveland say they are better off owning than renting, compared with 74 percent for the general population.
- In all three cities, people are willing to spend more money to own their homes rather than rent.
- In all three cities, residents are willing to buy even if they will stay in the home very briefly. Half of respondents will consider buying even if they plan to stay in the home two years or less, including 53 percent in Cleveland, 51 percent in Phoenix, and 46 percent in Seattle.
In addition to examining attitudes and behaviors toward homeownership by ethnicity, immigrant status, and geography, the analysis looked at the economics of owning and renting. According to the analysis:
The complexity of weighing both financial and lifestyle factors when deciding whether to own or to rent may result in some people favoring homeownership over renting, even if renting is the more beneficial housing decision.
- Sixty-six percent of respondents say they believe that housing is a safe investment - as safe as an IRA or a 401(k) plan.
- More than half say they believe that owning is a good idea, even if they plan to stay in the home less than three years.
- Eighty-six percent identify tax benefits as a reason to buy, even though tax benefits are small or non-existent for many homeowners.
Penn Schoen Berland, in partnership with Oliver Wyman, conducted telephone interviews with 2,041 members of the United States general population plus 1,566 additional respondents from geographic areas of interest. To inform the survey design, focus groups were held in Washington, DC and Phoenix, Arizona during July and August 2010. The telephone interviews were carried out during August and September 2010. In addition to the focus groups and telephone survey, additional research was conducted to evaluate the survey findings comparatively with historical market experience.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.
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SOURCE Fannie Mae