Most Millionaires would say it’s not the best time to buy a home, according to a new study from Millionaire Corner
Most affluent investors would say it’s not a great time to buy a home, according to a new Millionaire Corner study that shows record affordability is not tempting the majority of Millionaires back into the housing market.
Years of falling home prices and rising rents makes owning more affordable than renting a home in 98 of the nation’s 100 major metropolitan markets, according to the latest data from Trulia.com, which tracks the residential real estate market. But, cautions Trulia, a home purchase makes most sense for buyers who plan to stay in their home for at least five years and can reap benefits from the mortgage-interest tax deduction.
Investors have yet to share in the growing optimism shared by these and other industry professionals. Millionaire Corner research shows that 85 percent of current homeowners have seen their home values decline by 10 percent or more over the past five years. Prospective buyers have been sidelined by the economic downturn and tight credit conditions.
“Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face,” said Jed Kolko, chief economist for Trulia.
Buyers tend to return to a depressed market when they expect prices to go up, said Kolko, but a significant share of Americans believe home prices have farther to fall. Nearly one-fourth of Millionaire and Mass Affluent investors feel their home is not a stable financial asset, according to a first quarter 2012 study by Millionaire Corner on the attitudes and behaviors of wealthy investors. (Millionaires have a net worth of $1 million to $5 million, not including primary residence, while the Mass Affluent have $100,000 up to $1 million, not including the value of their home.)
Most of these affluent investors would avoid investing in real estate given the “current state of the economy,” according to the study, which shows only about 42 percent of Millionaire and Mass Affluent investors think it’s a good time to buy real estate. A small share feels it’s more prudent at present to rent than own.
Current data from the U.S. Census Bureau shows that the national homeownership rate was 66 percent at the end of 2011, a low last seen in 1998. At the same time, the bureau reports rental vacancy rates are at a six year low, as rents rise and home prices fall.
Younger investors appear slightly more sanguine about the real estate market than their older peers. About half the Millionaire and Mass Affluent investors age 44 and younger feel it might be smart to venture into the real estate market, At the same time, younger investors are also more likely to favor renting than owning – a preference shared by 28 percent of Millionaires age 44 and younger. Gen X and Gen Y investors are also more likely to view their home values as unstable – a view held by more than 30 percent of the youngest Mass Affluent and Millionaire investors.