Americans are souring the housing market.
New survey data from the Federal Reserve Bank of New York sheds light on Americans’ attitudes toward the nation’s housing market. And most households expect that the cost of keeping a roof over their heads is only going to rise over the next year — putting homeownership out of reach for many.
The survey found that the percentage of households that expect to purchase a home if they were to move in the next three years has decreased from a year ago. It’s the first time that this data point has fallen since the New York Fed began conducting this annual survey in 2014.
The decline was mostly driven by renters, as the percentage of renters who expected to buy a home if they were to move in the next three years fell by nearly 10 percentage points. Notably, fewer than 50% of renters expect they will own a house in the future.
Some renters are playing a waiting game. A 42% plurality of respondents indicated that they were holding off on buying in the hopes that home prices will fall. But for many renters, their pessimistic view comes down to this: The rent is too damn high, and it’s on the rise.
Households expected rents to rise 11.5% on average, according to this year’s survey. Last year, they anticipated only a 6.6% increase in rent.
“‘This is consistent with the idea that short-term rent expectations are being shaped by the sharp increases in rent that have occurred in recent months.’”
— New York Federal Reserve researchers
“This is consistent with the idea that short-term rent expectations are being shaped by the sharp increases in rent that have occurred in recent months,” the NY Fed researchers wrote.
At the same time, the percentage of existing homeowners who expect to buy their next home also slipped lower. The survey found that households’ views that owning a home was a good financial investment weakened slightly.
The survey was conducted in February — and that timing may have shaped respondents’ thoughts on other topics. Households told researchers that they expect home-price growth to accelerate in 2022, with respondents expecting a 7% increase in their zip code. Last year, survey takers only expected a 5.7% uptick in home prices.
“This increase, despite an increase in mortgage rates nationally since summer 2021, reflects strong momentum in home prices over the past 18 months,” the researchers wrote. Expectations for where home prices will go over the next five years, though, didn’t change much, signaling that Americans expect the housing market to moderate.
Households expected an acceleration in home price growth, despite the fact that mortgage rates have been on the rise since last summer. But the past month has seen a historic increase in interest rate, and mortgage rates now stand at the highest level in over a decade. Most housing analysts anticipate that home-price growth will slow through the rest of this year as a result, given the affordability constraints many buyers now face.