To Rent or Own: How Consumers Decide Between the Two

In a study to examine what factors would drive a person to rent or own in their next move, ""Fannie Mae"":http://www.fanniemae.com/portal/index.html found that a mix of demographics and attitudinal drivers were key, while negative housing events appears to do little to thwart would-be buyers.

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The study categorized respondents into three groups: renters, those with a mortgage, and outright homeowners.

After gathering demographics for the three groups, the study found that renters tended to be younger and fall into the low income category. For the survey, 46 percent of renters were in the 18 to 34 age group, and 43 percent of renters had an annual income under $25,000. Renters also tended to be single (41 percent) and employed part-time (47 percent).

Homeowners with a mortgage, on the other hand, were more likely to be in the 35-49 age group (41 percent), married (77 percent), and employed full-time (64 percent). They also tended to have a higher income, with 23 percent earning more than $100,000 and 39 percent earning between $50,000 to $100,000 thousand.

Those who were outright owners of their home tended to be 65 and older (46 percent) and retired (49 percent).

The study explained that traditionally, research has focused almost exclusively on demographic factors when trying to dissect the own-rent decision process.

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But, based on the survey, attitudes toward housing and finances also had a significant influence on individual decisions to rent or own. The groups most affected by attitudinal drivers were renters and those with a mortgage.

The housing attitude that was found to be the most influential is the belief that ""owning or renting makes more sense financially over the long term."" This is what drove all three groups to behave accordingly, depending on their situation.

One attitude that affected renters and discouraged them from buying was concern with affordability and housing maintenance.

An individual's existing homeownership experience, whether it was positive or negative, was a primary driver of the own-rent intention for a mortgage owner, but not for those who owned their home outright. According to Fannie Mae, the results suggest that once consumers buy a home and have a positive ownership experience, they want to continue being a homeowner rather than consider renting.

For renters and those with a mortgage, the belief in homeownership and aspirations to own a home one day was important in determining whether one expected to own or rent in the future.

For outright owners, demographics, rather than attitudes, determined housing choice preference. According to the study, this is probably due to the fact that the upside financial possibilities are less likely, considering most outright owners are retired and past their income peak.

The study also found that troubles in the housing market over the years did not prevent people from aspiring to buy. Even factors such as exposure to mortgage default, perceived home value appreciation/depreciation, and self-reported underwater status were not significant in predicting intentions to own or rent.

The study analyzed full year 2011 data from the Fannie Mae National Housing Survey and incorporated 12,014 individuals.