The American dream of owning a home seems to be slipping further and further away for renters in 2024. A recent survey by the New York Federal Reserve revealed that the percentage of renters who believe they will one day be able to afford a home has hit a record low of 13.4% as of February. This is a significant drop from 15% in 2023 and a staggering decline from the high of 20.8% in 2014. The sense of housing insecurity among renters is palpable, with many feeling pessimistic about their future prospects.
The survey also highlighted the many obstacles renters face when it comes to transitioning to home ownership. A whopping 74.2% of renters expressed that obtaining a mortgage was either somewhat or very difficult. This represents a substantial deterioration from the 66.5% level in 2023 and the 63.1% level in 2022. Additionally, mortgage rates have remained high by historical standards, with the average 30-year fixed-rate mortgage carrying a rate of 7.22%, the highest since late November 2023. The lack of affordability in the housing market is further exacerbated by the median housing price sitting at $388,700 in February, the highest since November.
Respondents to the survey are bracing themselves for further challenges in the housing market. They anticipate a 5.1% increase in housing prices over the next year, nearly double the expected rate of 2.6% in February 2023. This projection is significantly above the pre-pandemic average of 4.2%. Despite the possibility of the Federal Reserve cutting interest rates before the end of 2024, survey respondents believe that mortgage rates will only continue to rise. Expectations are for borrowing costs to reach 8.7% in a year and 9.7% in three years, both of which are survey records.
The outlook is equally bleak in the rental market. Respondents foresee rental costs increasing by 9.7% over the next year, up 1.5 percentage points from the previous year’s survey and the second-highest in series history. This grim reality for renters comes on the heels of the Federal Open Market Committee’s decision to keep benchmark interest rates steady while acknowledging a lack of progress in taming inflation. Futures market pricing indicates that the Fed may begin lowering rates in September, with another cut likely in December.
The dream of home ownership remains elusive for many renters in 2024. With soaring housing costs, elevated mortgage rates, and bleak predictions for the future, the path to owning a home seems increasingly out of reach. The housing market poses numerous challenges and uncertainties, leaving renters in a state of limbo as they grapple with the harsh realities of today’s real estate landscape.
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