Renters More Pessimistic Than Ever About Home Ownership

Households have a fairly bleak view of prospects for home prices in the immediate future, but a slightly more optimistic belief that they will come down over the next five years, according to the Federal Reserve Bank of New York 2024 Survey of Consumer Expectations for housing.

Average one-year ahead expectations for home prices have now reached their second-highest reading in the survey’s history. In 2024, respondents expect a 5.1% hike in home prices, compared to a rise of 2.6% predicted in 2023. Belief that prices will rise this year was widespread across demographic groups, but particularly true in the South. A price drop of 0.1% over the next five years to 2.7% was also expected.

Households also expect rents to go up 1.5 percentage points to 9.7% in the coming year, but then flatten over the next five years. “Renters’ views on the ease of obtaining a mortgage deteriorated substantially, with 74.2% stating that obtaining a mortgage is somewhat or very difficult. In fact, renters’ self-assessed probability of ever owning a home decreased to a new series low,” the survey showed.

Two-thirds of respondents thought buying property in their zip code was a “very good” or “somewhat good” investment. However, the share reporting that housing is a bad investment rose from 7.9% in 2023 to 9.1% in 2024.

Views on mortgage rates presented a mixed picture. “Households now expect mortgage rates to rise to 8.7% a year from now and 9.7% in three years’ time, both of which are series highs. Still, households on average believe there is a 61% chance that mortgage rates will fall over the next 12 months, which is also a series high,” the survey showed.

Renters remained pessimistic about their chances of getting a mortgage, with 74.2% saying it would be difficult – up 8.4 percentage points from 2023. And there was a 4.3 percentage point drop to 40.1% in the number of renters who believe they will ever be able to buy a home – a new low.

The 2024 survey did show a slight improvement in homeowners’ perception of their ability to refinance their mortgage during the year ahead. The perceived probability of being able to refinance rose to 6.3% — reversing a two-year decline, but still well below pre-pandemic levels. Prospects for moving to a new primary residence also fell to new lows at both the one-year (13-14%) and three-year (24.5%) time horizons, the survey showed.

Analyzing the survey results in a related blog post, NY Fed researchers noted, “Across the distribution of homeowners’ current self-reported mortgage rates, close to half of respondents assess their probability of moving in the next three years to be less than 10 percent, with almost three-quarters of respondents placing their chances at less than 25 percent. These patterns are broadly consistent across homeowners with and without a mortgage, as all groups report a mean probability of moving in the next three years between 16 percent and 19 percent.”

These results, the researchers wrote, are consistent with historical trends of reduced mobility that pre-date the pandemic.

In the survey, respondents were asked to assess their chances of moving if they could do so and keep their current low mortgage rates. That did boost households’ willingness to move. However, “close to half of respondents do not revise their moving probability at all, and about 73.4 percent revise their probability by 10 percentage points or less,” the researchers wrote.

“We interpret this to mean that mortgage rates are not a primary factor in most respondents’ relocation plans for the next three years but are a large constraint for a relatively small but significant share of homeowners.”