NAR’s Profile of Home Buyers and Sellers for 2016 was based upon a 132-question survey that generated 5,465 responses from buyers.

Zillow conducted a 160-question survey of 13,000 homebuyers who had closed transactions in 2016.

Myth 1: Millennial attitudes toward ownership differ from those held by boomers

The average buyer in the study was 36 years old with half the buyers being millennials. Zillow’s study is especially compelling because the dataset is more than twice as big as NAR’s dataset.

The primary reason respondents wanted to purchase a home was the desire to own a home of their own. Studies also found that the percentages of millennials versus boomers who wanted to become homeowners were virtually identical.

Myth 2: First-time buyers are being shut out of the market

NAR’s data and Zillow’s data differ on one very important point. NAR reports that first-time buyers only accounted for 32 percent of the market in 2015 and only 35 percent in 2016.

In stark contrast to NAR’s findings, Zillow COO Amy Bohuntinsky reported that its data showed that 53 percent of all sales in 2016 were to first-time buyers.

Given the size and the depth of the Zillow study, one could certainly argue that the NAR numbers may be seriously underestimating the percentage of first-time buyers.

Myth 3: Homes are less affordable for first-time buyers

Zillow’s findings showed that today’s borrowers are spending an average of 15 percent of their income on their mortgage versus the 30 percent that they spent in the 1980s.

Even though prices are higher, today’s first time home-buyers are spending a smaller proportion of their paycheck on their house payments.

Myth 4: It’s cheaper to rent than it is to buy

CNBC article proclaimed that it costs more to own versus to rent a home in every U.S. state.

Although the median rents may be less than the median house payments, that comparison is a poor one, and here’s why.

  1. The median payments for homeowners will always be substantially higher than they are for renters, primarily due to the large number of homes that are priced at $500,000 or more. Homes at this price point and above only constitute a tiny proportion of the overall rental market.
  2. Every month that homeowners make a payment, they build equity. Even if there is zero appreciation or inflation, at the halfway point on a 30-year mortgage, the typical homeowners will have approximately a 35 percent equity position in their home.
  3. Focusing on the monthly cost of renting versus owning fails to acknowledge the money saved by the homeowner over time. To illustrate this point, rents increase over time — fixed mortgages do not. For example, a rental payment in July 2002 of $1,500 would have increased to $2,038.75 by July 2017 due to inflation.

Myth 5: Prices are leveling off — waiting to purchase won’t make any difference

Assume that a buyer is going to purchase a property and obtain a loan of $200,000 at 5 percent fixed for 30 years. If the interest rates increase to six percent, the buyer may pay up to an extra $50,000 in interest over the life of the loan.

If the interest rates increase to 7 percent, the buyer will pay almost a $100,000 more in additional interest.

In other words, an interest increase of 1 percent results in about a 25 percent increase in interest over the life of a 30-year fixed rate loan. An increase of two points in interest results in a whopping 50 percent increase in the amount of interest paid. That’s why it’s smart to buy now when rates are at historic lows.

So, here’s the bottom line. The next time some other “expert” tells you that it is cheaper to rent than it is to buy, share the information in today’s blog with them.