Matthew Ferrara, Philosopher

Surprise! Fannie Mae Study Challenges Traditional Housing Beliefs

Imagine our surprise when the results of a Fannie Mae survey sounded like one of our recent postings. Apparently something big is happening with consumer attitudes and housing!

Ok, just for fun, we have to point out a Fannie Mae survey that sounds an awful lot like it came directly from blog. In “Are you ready for a drop in first time buyers?” we reiterated our belief that the next generation of buyers () won’t act like their parents’ generation (Baby Boomers) when it comes to housing. Fannie’s survey results hit HousingWire on Dec 9th; Our entry was published on the 7th.

It is nice to see we’re not crazy.

Fannie Mae’s report is titled “Housing Choices throughout the Lifecycle and the Impact of Changing Deomgraphics” and all we can add is: No kidding? And we didn’t charge the taxpayer a penny for our conclusions. In our analysis, we discussed with Steve Harney that while Gen Y still “believes” in the American Dream, it looks like many will be deferring that dream a lot longer than their parents did, creating a “vacuum” in replacement population of first-time buyers.

Were we nuts? Here are the highlights from Fannie Mae’s survey (from HousingWire):

Although 51% of survey respondents said the housing crisis has not affected their overall willingness to buy a home, 33% said they would be more likely to rent their next home than buy. In January, 30% of Americans surveyed said they would rent a home the next time around.

  • 89% of homeowners, as well as 49% of renters, feel they would be better off owning a home in the current economy
  • The homeownership rate among young adults (ages 25 to 29) decreased 11% “since peak rates” before the housing crisis
  • Married couples are the most likely to own a home… but only 50% of households were married couples, down from 56% in 1990
  • 78% of respondents said children were a major reason to own a home, however, the percentage of families with children is at an all-time low of 49%
  • 57% cited financial benefits as the best reason to rent
  • 29% said lifestyle benefits were the biggest perk to renting
  • People 50 and older hadn’t changed their sentiments towards home ownership in recent years

And the final sentence in the press release:

A person ages 65 to 74 is 3.5 times more likely to own a home than a person under 25.

So while home ownership remains an “overall” winner it’s clear that changing demographics and lifestyle choices (and a recession) are changing people’s minds about housing. This includes people of the “traditional” age for first time purchases, as well as current owners who might rent next time rather than buy again.

There’s a huge shift in attitudes underway regarding home ownership in America.

In my experience, consumer sentiment trumps reason when it comes to big purchase like housing. Emotions trumped reason during the boom; it will trump reason during the bust. And after it. Generally, people buy with their gut first, their wallet second and their brains third. It’s why we argued in our last entry:

…if Gen Y’s behavior cannot be stimulated by mere tax policies, because what they value has changed when they will integrate home ownership into their lifestyles, how will a generation of real estate agents define their value proposition? Will offering a “Free School Report” mean anything to future buyers? What happens if the “rent vs buy” argument isn’t as important as the “save the planet” argument or some more basic reason why the Global generation might not want to be “tied down” for the next fifteen years?

This is the most important challenge facing real estate professionals for years to come. QR codes or Facebook or tablet computers won’t solve this problem because it’s not about process. New marketing won’t make a difference, because the “buy, don’t rent!” message can’t be heard whether on postcards or smartphones. Which “script and dialogues” will explain why a twenty-something can’t take a job in Tokyo because the market in Florida is overwhelmed?

The value of housing – financially and emotionally – is different than in the past. We don’t get to determine it – do. And it’s clearly different than what many in the real estate industry believe is valuable.

Most agents – average aged 54 – still think it’s “better” to buy than to rent. Better is a value judgement their customers might not agree with.

When next generation consumers value something different than what you were trained for – or personally believe – call a time out. When the game is shifting in our heads, all bets are off. And it means the future of housing is going to be one heck of an exciting place!

  • Robet Demassi


    I agree we need to change our approach and address different segments of the BUYING market, i.e. investors. I also feel that since 2000, if a person purchased a home going through the highs and lows of the market till now, that person whould have gotten a larger ROI than if the same amount of money was in the Stock Market (BY FAR)…….Isn’t Real Estate a GOOD INVESTMENT ???

  • I do agree! I wish we all had made that move (literally). Going forward into the next decade it also looks like real estate could create great returns. The challenge is getting that message to a generation that doesn’t worry about investments until later in their life.

  • Someone still has to own the rented homes.

  • Bsahlman

    It still comes down to the old scenario. Where can you build long term wealth? For most people it is still in the equity they build in a home. NO matter what you do, renting does not put any money into your long term wealth goal. And with rents rapidly becoming equal to the cost of owning a home, why is it so hard to figure out. This is like having a forced saving account which most young people do not have.

  • Maybe. But accouting for inflation, 4 to 5% isn’t building too much wealth…..

    Sent from Samsung mobile

  • Wmanos

    The issue as I see it, and I’m a Gen Xer speaking from personal experience, is more along the lines of points Matthew has articulated before, and I concur. I have no idea where I’m going to be in the next 5 years. And in the current economic environment with projected appreciation levels being relatively low and an unlikely recovery on the horizon, there is no way I’m going to gamble that conditions will improve before I need to move on.

    Relocation already has become a part of life for many people my age. I can count on one finger, friends that have been at the same company for more that 5 years. And almost all of my friends, myself included, have moved at least 3 times in the last 10 years. We don’t begrudge it, it’s just the way that it is, and we make economic decisions based on the reality of our careers. I might even argue that renting gives me the flexibility and agility I need to make career decisions. I can literally pick up and move to a better, higher paying job wherever and whenever I need to.

    There is also another less quantifiable issue with people of my generation, which is the value of my time, free time in particular. No one, and I mean no one I know (including commuting), is working less than 60 hrs per week. The last thing I want to do when I’m not working is tend to a property that is not appreciating very much, and will likely not be a permanent residence for the foreseeable future.

    These are not conditions that are conducive to long term real estate “investment”.