The lack of affordability is sharply increasing the share of American renters who don’t believe they’ll ever own a home, according to new data from Redfin.
The real estate brokerage commissioned a survey in February that found that 38% of renters don’t believe they will ever own, up from 27% in a survey conducted in May and June last year.
Asked for reasons why, 44% of renters who don’t believe they’ll buy a home in the near future said that available homes are too expensive. Thirty-five percent cited the difficulty in saving for a downpayment, and 33% pointed to an inability to afford mortgage payments.
The high mortgage rate environment also reared its ugly head among survey responses, with 33% saying that mortgage rates are currently too high.
According to Redfin’s data, first-time homebuyers need to earn some $76,000 to afford a typical starter home. That’s up 8% from last year and, staggeringly, up nearly 100% from before the pandemic. Monthly mortgage payments, meanwhile, have risen over 10% in the past year.
“Housing costs are high across the board, but renting is a more affordable and realistic option for many Americans right now–especially those who have never owned a home and aren’t able to tap into equity from a previous sale,” said Daryl Fairweather, chief economist at Redfin. “While owning a home is usually a sound long-term investment, the barriers to entry and upfront costs of buying are higher than renting.
“Buying typically requires a sizable downpayment and approval for a mortgage — things that are difficult for many people today, when the typical downpayment is near $60,000 and mortgage payments are sky-high. The sheer expense of purchasing a home is causing the American Dream of homeownership to lose some of its shine,” Fairweather added.
Taking the plunge into homeownership appears even more of a bridge too far when many renters are struggling with their current housing expenses, according to Redfin’s survey. Twenty-four percent of renters “regularly” struggle to afford their housing payments, the survey found, while another 45% say they “sometimes” struggle to afford rent.
