Renters’ hopes of being able to buy a home have fallen to a record low, New York Fed survey shows

The
dream
of
home
ownership
has
gotten
even
further
away
for
renters,
with
higher
housing
costs
and
elevated
interest
rates
standing
in
the
way
of
the
American
housing
dream,
according
to
a
New
York
Federal
Reserve
survey
released
Monday.

The
share
of
renters
as
of
February
who
possess
hopes
of “residential
mobility,”
or
the
belief
from
renters
that
they
one
day
will
be
able
to
afford
a
home,
fell
to
a
record
low
13.4%
in
the
central
bank’s
annual
housing
survey
for
2024.

That’s
down
from
15%
in
2023
and
well
off
the
20.8%
series
high
back
in
2014.

Pessimism
about
future
prospects
comes
amid
a
confluence
of
factors
conspiring
against
the
likelihood
of
renters
being
able
to
transition
to
home
ownership.

For
one,
some
74.2%
of
renters
viewed
obtaining
a
mortgage
as
somewhat
or
very
difficult,
which
the
New
York
Fed
said
has “deteriorated
substantially”
from
the
66.5%
level
in
2023
and
63.1%
in
2022.

Moreover,
mortgage
rates
have
remained
high
by
historical
standards.
A
30-year
fixed-rate
mortgage
now
carries
an
average
7.22%
borrowing
rate,
the
highest
since
late
November
2023,

according
to
Freddie
Mac.

Housing
affordability
has
improved
little,
with
the
median
price
in
February
at
$388,700,
the
highest
since
November,
according
to
the
National
Association
of
Realtors.
The
NAR’s

housing
affordability
index
was
at
103
in
February,
down
slightly
from
January
but
still
at
elevated
levels
with
average
monthly
housing
payments
at
$2,040.

Survey
respondents
expect
housing
prices
to
increase
5.1%
over
the
next
year,
nearly
double
the
2.6%
expected
rate
in
February
2023
and
above
the
pre-pandemic
mean
of
4.2%.

Despite

prospects
for
the
Fed
to
cut
interest
rates
before
the
end
of
2024,
respondents
think
mortgage
rates
are
only
going
to
go
higher.
The
outlook
for
a
year
from
now
is
that
borrowing
costs
will
be
8.7%,
and
9.7%
in
three
years,
both
survey
records.

There’s
not
a
lot
of
good
news
on
the
renting
front,
either.
Respondents
expect
rental
costs
to
increase
by
9.7%
over
the
next
year,
up
1.5
percentage
points
from
last
year’s
survey
and
the
second
highest
in
series
history.

The
results
come
a
week
after
the
Federal
Open
Market
Committee

voted
to
hold
benchmark
interest
rates
steady
while
indicating
that
there
has
been “a
lack
of
further
progress”
in
its
efforts
to
bring
the
annual
inflation
rate
back
down
to
2%.

Futures
market
pricing
is
indicating
that
the
Fed
will
begin
lowering
rates
in
September,
with
a
another
cut
likely
to
come
in
December.