A sign advertising a home for sale is posted outside a building in Manhattan on April 11, 2024 in New York City.
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Rising housing costs and rising interest rates are putting a damper on America’s housing dreams, with the dream of homeownership getting further away for renters, according to a survey released Monday by the New York Fed.
The central bank’s annual housing survey for 2024 shows that as of February, the percentage of renters who have a desire for “residential mobility” — that is, the percentage of renters who are confident that they will be able to buy a home someday — is at an all-time low. of 13.4%.
This is down from 15% in 2023 and well below the series high of 20.8% in 2014.
The pessimism about the future comes amid a confluence of factors that impede renters’ ability to transition to homeownership.
As an example, approximately 74.2% of renters believe it is somewhat or very difficult to obtain a mortgage, and the New York Fed estimates that this percentage has increased “significantly,” from 66.5% in 2023 and 63.1% in 2022. “It got worse,” he said.
Additionally, mortgage rates remain high even by historical standards. The average borrowing rate for a 30-year fixed-rate mortgage is currently 7.22%, the highest level since late November 2023, according to Freddie Mac.
Home affordability has barely improved, with the median price in February at $388,700, the highest since November, according to the National Association of Realtors. NAR’s February Home Affordability Index was 103, down slightly from January, but the average monthly housing payment remains high at $2,040.
Survey respondents expect home prices to rise 5.1% over the next year, nearly double the expected rate of 2.6% in February 2023 and above the pre-pandemic average of 4.2%.
Despite expectations that the Fed will cut rates by the end of 2024, respondents believe mortgage rates will only rise. According to both survey records, the projected borrowing cost will be 8.7% in one year and 9.7% in three years.
There isn’t much good news on the rental front either. Respondents expect rental costs to increase by 9.7% over the next 12 months, an increase of 1.5 percentage points from last year’s survey and the second highest in series history.
The results came a week after the Federal Open Market Committee voted to keep the benchmark interest rate unchanged, but showed a “lack of further progress” in efforts to return annual inflation to 2%.
Futures market prices indicate the Fed will likely start cutting rates in September, with another cut likely in December.
