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Nearly 10M more renter households had income to qualify to buy home in 2012 vs. 2005

  • Many factors have increased the number of renter households qualified to purchase a home in 2012 versus 2000 and 2005: 1) incomes have increased, 2) population has grown, 3) mortgage rates are lower, and 4) prices have fallen since 2005.
  • Additionally, while home prices rose from 2011 to 2012, lower mortgage rates have more than offset the gains, so the income needed to purchase the median priced home has actually gone down from 2011 to 2012 in spite of rising home prices.
  • The tables below show the data underlying the change in required income. Qualifying income required to purchase a median priced home has fallen from $50,400 in 2005 and $40,300 in 2000 to $33,100 in 2011 and $31,700 in 2012 [1].

  • Finally, based on all of these factors, we see that while 33 percent of renters qualified to buy the median priced home in 2000 and 24 percent of renters qualified to buy the median priced home in 2005, 47 percent of renters would qualify in 2011 and 40 percent would qualify in 2012 [2]. Translating these numbers into households, roughly 8 million renters qualified to purchase the median priced home in 2005 while in 2012, 20 million renter households qualify.
  • These calculations assume that potential buyers meet credit qualifications and have sufficient cash on hand to close a transaction. Lending standards, credit quality, and access to funds will affect the number of households who will ultimately be able to buy a home.

[1] All values are nominal, not real values.

[2] This calculation assumes that income distribution in 2012 is the same as it was in 2011.

Danielle Hale, Research Economist

As a Research Economist at NAR, Danielle studies tax issues, the wealth impact of home ownership, and different measures of home prices.

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Comments
  1. Brenda

    Ok, some reasonable stats for a text book, but where are these creditworthy buyers? Talk to the mortgage professionals, banks and car dealers….the consumers they are seeing are less than stellar. Not too many people survived the last 3 to 5 years unscathed by the less than forgiving FICO matrix….

  2. As a full service #Benicia real estate brokerage, we get to see both sides. We love it when tenants turn into to property owners. However, with the downturn in the economy, we got to see them come back as tenants. The lending qualifications have gotten more strict, I believe we see this with the reduced percentage needed. Lenders are requiring more but less. It is difficult for older owners that were lead down the path by leveraging their homes and have lost their homes. They have no time for real estate to forgive them. They are now our tenants also.