The dream of home ownership seems to be slipping further away for renters in America. A recent survey released by the New York Federal Reserve shows that the share of renters who believe they will one day be able to afford a home has reached a record low of 13.4% in 2024. This is a significant drop from 15% in 2023 and a far cry from the 20.8% high back in 2014.
Several factors are contributing to the growing pessimism among renters about their ability to transition to home ownership. The survey found that a whopping 74.2% of renters view obtaining a mortgage as either somewhat or very difficult. This represents a substantial deterioration from previous years, with only 66.5% expressing difficulty in 2023 and 63.1% in 2022. Additionally, mortgage rates have remained high by historical standards, with a 30-year fixed-rate mortgage now carrying an average borrowing rate of 7.22%, the highest since late November 2023.
Challenges with Housing Affordability
Housing affordability has not seen significant improvement, with the median price reaching $388,700 in February, the highest since November. The National Association of Realtors reports that the housing affordability index was at 103 in February, down slightly from January but still at elevated levels. This is reflected in the average monthly housing payments, which stand at $2,040. Survey respondents predict that housing prices will increase by 5.1% over the next year, nearly double the expected rate in 2023.
The outlook for renters is also bleak, with respondents expecting rental costs to increase by 9.7% over the next year. This is a significant jump from last year’s survey and marks the second-highest increase in series history. Despite hopes for the Federal Reserve to cut interest rates before the end of 2024, respondents believe that mortgage rates will continue to rise. The forecast for borrowing costs is 8.7% in a year and 9.7% in three years, both setting new records in the survey.
Uncertain Future
The results of the survey come shortly after the Federal Open Market Committee voted to keep benchmark interest rates steady, citing a lack of progress in bringing the annual inflation rate back down to 2%. The futures market suggests that the Fed may begin lowering rates in September, with another cut likely in December. However, the overall outlook for renters and prospective homebuyers remains uncertain and challenging.
The American housing dream appears to be further out of reach for renters than ever before. With high housing costs, elevated mortgage rates, and the prospect of increasing rental prices, the road to home ownership seems daunting. Without significant changes in the housing market and economic conditions, renters may continue to struggle to realize their dreams of owning a home.