Prompted by what it called housing shocks - delinquencies, foreclosures, and a precipitous decline in housing prices - Fannie Mae recently undertook a study of the factors that influence Americans' intentions to own or rent their home.  Examining drivers of homeownership preferences, it said, has important implications for both housing policy makers and industry players.

The study, released on Thursday, involved predictive modeling to determine which subjective attitudes and objective demographic conditions best accounted for an individual's current status as owner or renter and their intensions to own or rent were they to move.  Attitudinal factors were included as they are believed to be both stimulators and leading indicators of behavior.

The study looked at a full year (2011) of data from Fannie Mae's monthly National Housing Survey which over the year included the responses of over 12,000 individuals to sets of 100 questions about the economy, their own finances, and attitudes toward ownership and renting.  Respondents were in three groups; renters and homeowners both with and without a mortgage.  These groups tend to cluster by age and marital status with renters being younger and single; mortgaged homeowners middle-aged, married, and employed full-time; and outright owners (no mortgage) tending to be older and more likely to be retired and/or widowed.

Those most likely to expect to buy their next residence tended to be white, currently owning with a mortgage, in the 35-49 age group, employed full time, and in the higher age income groups.

When researchers grouped the study variables - demographics, housing attitudes, and financial attitudes - it appears that demographics, (income, age, marital status, and employment status) are the primary drivers of current homeownership and of the potential decision of outright owners to buy or rent.  However, renters and mortgaged homeowners, which together account for about 80 percent of the housing units in the U.S., were driven more by housing preference and housing and financial attitudes.

In a more granular analysis the researchers found:

• The belief of whether owning or renting makes more sense financially over the long term in the most important attitude for all three populations and is the biggest overall driver for renters.
• The perceived ease or difficulty of getting a mortgage is the primary driver for mortgaged owners but is much less important to renters.
• Whether owning a home has been a positive experience was the primary driver of the own-rent decision among mortgaged owners but not among outright owners.
• Concern with the affordability of home purchase and the upkeep of a house is a major factor discouraging renters from buying.

Interestingly, exposure to default, perceived home value appreciation or depreciation and non-financial benefits of homeownership such as safety or more space made no major incremental contributions to predicting the own-rent intention in the models and self-reported underwater status made even less.

Figure 4 shows that age is also a factor in the distribution of the own-rent decision making process.  Attitudes are the biggest drivers for younger renters and middle-aged mortgage owners but demographics are the lead drivers for older outright-owners.

The authors of the study say that previous research has focused almost exclusively on demographics as drivers in the own-rent decision but this study showed that the decision is influenced by a mix of demographics and attitudes.  It is possible that some of the drivers, especially the attitudinal ones, may be unconscious biases that lead consumers "to less fulfilling and less successful housing choices - e.g. driving a consumer to over-consume in their home purchase and ultimately default, fears that prevent a well-qualified renter from purchasing a home that will better suit their needs, or expectations that drive a happy renter to become a less happy homeowner."

Further, the authors say their study shows that the recent negative housing events have not damped the impulse to own a home; that Americans' aspirations to homeownership are strong even when facing dramatic challenges.  If further research bears out these initial conclusions it might be worthwhile to:

• Provide further education to potential homeowners to understand and balance their financial commitment with the less tangible but powerful attitudes that drive their own behavior;
• Reflect the impact of attitudinal drivers on how consumers value housing in underwriting, pricing, and risk models, especially since they may influence behaviors in distress scenarios; and
• Consider the impact of this emphasis on attitudinal drivers on prudential and regulatory standards.