A sign advertising a home for sale is displayed outside a building in Manhattan on April 11, 2024 in New York City.
Spencer Platt | Getty Images
The dream of owning a home has become even more distant for renters as higher housing costs and higher interest rates stand in the way of America’s homeownership dream, according to a New York Federal Reserve survey released Monday.
The share of renters hoping for “home mobility” in February or expecting to one day be able to afford a home fell to a record low of 13.4% in the central bank’s annual housing survey for 2024.
That’s down from 15% in 2023 and well below the series high of 20.8% in 2014.
Pessimism about future prospects arises from a combination of factors that militate against the likelihood of tenants being able to transition into home ownership.
For one, about 74.2% of renters viewed obtaining a mortgage as somewhat or very difficult, which has “deteriorated significantly” from 66.5% in 2023 to 63.1% in 2022, according to the New York Fed.
Additionally, mortgage rates remain high by historical standards. According to Freddie Mac, the borrowing rate for a 30-year fixed mortgage is currently averaging 7.22%, the highest since the end of November 2023.
According to the National Association of Realtors, housing affordability has barely improved. The average price was $388,700 in February, the highest level since November. The NAR housing affordability index was at 103 in February, a slight decrease from January but still at an elevated level, with the average monthly housing cost at $2,040.
Respondents expect home prices to rise 5.1% next year, almost double the expected rate of 2.6% in February 2023 and above the pre-pandemic average of 4.2%.
Despite the prospect that the Fed will cut interest rates before the end of 2024, respondents expect mortgage rates to only go up. The forecast for one year is that the cost of borrowing will be 8.7% and in three years it will be 9.7%, according to the survey.
There isn’t much good news in the rental sector either. Respondents expect rental costs to rise 9.7% next year, up 1.5 percentage points from last year’s survey and the second-highest increase in the series’ history.
The results come a week after the Federal Open Market Committee voted to keep interest rates stable while indicating there was a “lack of further progress” in its efforts to bring annual inflation back to 2%. have.
Futures market prices suggest the Fed will begin cutting rates in September, with another cut likely in December.
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2024-05-06 15:00:06
www.cnbc.com
