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Renters’ Hopes of Homeownership Falls to Record Low
May 7, 2024
The dream of homeownership feels further away than ever before for renters, as high housing costs and elevated interest rates feel increasingly insurmountable, according to a recent report from the New York Federal Reserve.
The latest survey of renters from the New York Fed found that, as of February, the share of renters who believe they will one day be able to own a home fell to a record low of 13.4%. That is down from 15% in 2023 and down substantially from the record high of 20.8% seen in 2014.
Their growing pessimism about the future prospects of homeownership comes amid a confluence of challenges facing renters. For one, the survey found that 74.2% of renters viewed obtaining a mortgage as somewhat or very difficult, a figure that the New York Fed said has “deteriorated substantially” from the 66.5% level in 2023 and 63.1% in 2022.
Affordability is another major concern. The median price for a home sold in February (the most recent month for which data is available) was $388,700, the highest since November, according to the National Association of Realtors (NAR). The NAR’s index of housing affordability was at 103 in February, down slightly from the month prior, but still well above historical norms.
The survey’s respondents expect home prices to increase at an accelerated pace, climbing 5.1% over the next year. That is nearly double the 2.6% expected price increase seen in 2023’s survey.
They also expect mortgage rates to continue climbing. A 30-year fixed-rate mortgage now carries an average 7.22% borrowing rate, the highest since late November 2023, according to Freddie Mac. Renters’ outlook for a year is that mortgage rates will be at 8.7%, and 9.7% in three years. Both figures are record highs for the survey.
The report comes less than a week after the Federal Open Market Committee voted to hold benchmark interest rates steady, indicating that there has been “a lack of further progress” in its efforts to bring the annual inflation rate back down to 2%.
