SEATTLE, Sept. 8, 2020 /PRNewswire/ -- The rise of remote
work has the potential to unlock the American Dream of
homeownership for nearly two million renter households. A new
Zillow® analysis finds that's how many renter households could
likely telecommute and afford monthly payments on the typical U.S.
starter home, but couldn't afford a starter home in their current
metro.1
The numbers are more pronounced in expensive coastal metros like
San Francisco, where 22% of
renters priced out of their metro could afford monthly payments on
a typical U.S. starter home, estimated at $7252. Monthly payments on a typical
San Francisco city starter home
are more than seven times higher, at $5,181. More than 10% of renters who couldn't
afford to buy in the city of San
Francisco, could afford a starter home within the greater
San Francisco metro area, offering
more options farther afield to aspiring buyers who no longer need
to commute to the office five days a week.
In cities such as Minneapolis,
Phoenix and Denver, the opposite is true. In Denver,
for example, starter homes in the city are more affordable than in
the metro area, yet 14.5% of renter households priced out of
homeownership in the Denver metro
could afford a typical starter home elsewhere in the country.
Not all renters will find it more affordable to buy a home
outside their current metro areas. Places such as Pittsburgh, El
Paso and Rochester offer
more affordable starter homes than the country as a whole, meaning
aspiring buyers would have to pay more if they wanted to
leave.
Zillow's analysis looked at renter households for whom monthly
payments on a starter home in their metro are unaffordable, but
would be affordable on the typical U.S. starter home. Those
households were then assigned a probability of being able to
telecommute based on income, the worker's industry and
occupation.
"If remote work becomes a bona fide long-term option especially
with the pandemic, that could reshape the U.S. housing market by
opening up homeownership to people renting in expensive parts of
the country," said Zillow economist Jeff
Tucker. "However, it's unclear how many people would make
the move to buy their first home. Proximity to work is just one of
the factors people consider when choosing where to live. Other
factors may keep them from moving including proximity to friends
and family, cultural and natural amenities, and their kids'
schools."
The pandemic-led shift to telework has already upended housing
preferences, as people rethink how and where they want to
live. A previous Zillow survey from the Harris Poll found
that if given the option to continue working from home, at least
occasionally, 66% of renters say they would consider moving.
Millennials, between 26 and 40 years old, represent nearly half
of the 1.92 million renter households who could afford
homeownership if given the flexibility to work from home, the
largest generational group to benefit from these new options.
The average age of these potential movers is 38.
Millennials had been dubbed the "doomed generation," as a
complex tangle of overlapping factors made first-time homeownership
a pipe dream for so many. Rapid home price growth outpaced income
growth, and a severe inventory shortage sparked intense competition
for starter homes, locking many first-time buyers out of the
market. High levels of student debt have also made it difficult to
save for a downpayment, driving 8.6 million millennials to move
back home with Mom and Dad as of June
2020.
The American Dream may have been delayed, but it hasn't lost its
luster for this generation. In a 2020 Zillow survey, 61% of
millennial renters said they are likely to consider buying a
home.3 This massive generation was already on track to
bring a wave of first-time buyers to the market, with an extra 3.11
million people reaching prime homeownership age in the coming
years.
"Two-thirds of our buyers are millennials," said Zillow Premier
Agent Holly Mellstrom, a
Pelham, NY-based associate broker
at Julia B. Fee Sotheby's International Realty. "They're looking to
put down roots and get more space for their money after high-rise
city living. Many have young families and were planning to move to
the suburbs in the future, but they're making the move now because
they don't anticipate having to commute into the city to work
everyday."
Chris Chan, 40, and his wife,
Eunice Lee, 35, became home buyers
during the pandemic, moving from a two-bedroom co-op in
Brooklyn to a five-bedroom house
in Westchester County, NY.
"The tipping point was envisioning both of us working from home
indefinitely alongside our daughter and a second child on the way,"
said Chan, who works in Connecticut. "We wanted to maintain the
balance between space and proximity to the city. We could get more
for our money just outside city limits and we're still only 30
minutes from Grand Central Station."
About Zillow
Zillow, the top real estate website in the U.S., is building an
on-demand real estate experience. Whether selling, buying, renting
or financing, customers can turn to Zillow's businesses to find and
get into their next home with speed, certainty and ease.
In addition to for-sale and rental listings, Zillow Offers buys
and sells homes directly in dozens of markets across the country,
allowing sellers control over their timeline. Zillow Home Loans,
our affiliate lender, provides our customers with an easy option to
get pre-approved and secure financing for their next home
purchase.
Millions of people visit Zillow Group sites every month to start
their home search, and now they can rely on Zillow to help them
finish it — with the same confidence, ease and empowerment they've
come to expect from real estate's most trusted brand.
Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and
ZG).
1 Methodology: HHs for whom expected monthly
payments on a starter home (30-year 3.0% interest mortgage with 20%
down, plus estimated taxes, insurance, HOA dues) are not affordable
(<= 30% of HH income) for metro bottom-tier ZHVI (Zillow
Home Value Index) but are affordable for national bottom-tier
ZHVI. Variables compare primary city to metro in the same way.
HHs were assigned a probability of being able to telecommute by
income weighting individual earner probabilities. Individual
probabilities were derived from an intersection of the
probabilities by worker's industry and occupation presented in this
BLS analysis of American Time Use Survey data. The denominator is
the total number of renter households.
2 Estimated monthly payments were calculated
assuming a 30-year fixed rate mortgage at a 3.0% interest rate with
a 20% down payment. Property tax was estimated at 0.8% annually,
plus $1,000 annual homeowners'
insurance and HOA dues of 0.000833% of home value per month.
3 Zillow Group partnered with independent market
research and data analytics firm YouGov® to conduct a nationally
representative, online quantitative survey that gathered
information from a total of 13,000 key household decision makers,
including 3000 buyers, 3000 sellers, 3000 renters that moved in the
past year, 3000 homeowners, and 1000 new construction buyers. For
more information visit zillow.com/report
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SOURCE Zillow