Faced with a white-hot real estate market, renters are losing confidence they will ever own a home.
On average only 43.3% of renters expect to own a home at some point in the future, down sharply from 51.6% in 2021, according to a Federal Reserve Bank of New York survey released on Monday.
That’s the lowest level since the NY Fed began asking the question in 2015.
High prices appear to be a driving factor: Twenty-two percent of households in the survey report they planned to buy a home but now view renting as a better financial decision. Most respondents either prefer to rent (36%) or said they were waiting for prices to come down before buying (42%).
The findings come after home prices spiked last year by the most on record, surpassing even the blockbuster growth of the early 2000s housing bubble. Some people who had hoped to buy have been priced out of the market, forcing them to rent instead. That in turn has helped to drive up rental rates.
The shift in sentiment in the NY Fed survey was driven by families with less college education and lower income.
About one in three (34%) of those surveyed who make less than $60,000 think they will eventually own a home. That’s down from 46% in 2020.
Likewise, 34% of those with less than a bachelor’s degree expect to own a home, down from 46% two years ago.
Meanwhile, families are bracing for their rental rates to spike.
Households expect rent to climb by 11.5% over the next 12 months, nearly double the 6.6% pace anticipated in February 2021. And over the next five years, households expect annual rent to rise by 5.2%, compared with 4.4% a year ago.
“Taken together, these numbers suggest a spike in rents in the near future, followed by more moderate growth in subsequent years,” the NY Fed said in the report.