Homeownership Symposium - To Buy or Not to Buy? Understanding Tenure Preferences and the Decision-Making Processes of Lower-Income Households

HBTL-14: In this paper, Reid reports on the findings from four focus groups and twenty individual interviews designed to examine how households make decisions about buying a home. The focus groups and interviews were conducted in Oakland, California, and Albuquerque, New Mexico, between December 2012 and February 2013.  All of the respondents—43 in total—were members of lower-income households (earning less than the median for their respective Metropolitan Statistical Areas),  with children, of working age, and who were in the process of buying a house or had bought a home within the last six months.  For all of them, this was their first home-buying experience, and all but three were going to be the first generation in their families to own property in the United States.  As a result, the data provide rich insights into the processes that influence the homeownership decisions of lower-income, first time homebuyers.  This paper summarizes the findings related to four key aspects of the decision-making process: a) what motivates the shift from renting to owning; b) what factors influence neighborhood choice; c) the heuristics borrowers use to make financial decisions about their housing choices; and d) the prevalence of “optimism bias” in household decisions about buying a home, and how that optimism stands in stark contrast to their vulnerability in the labor market.