Interest rates

Shaken by rising interest rates and house prices, Americans are less sure they can own their next home

The Americans are degrading the housing market.

New survey data from the Federal Reserve Bank of New York sheds light on Americans’ attitudes toward the country’s housing market. And most households expect the cost of keeping a roof over their heads to only rise over the next year, putting homeownership out of reach for many.

The survey found that the percentage of households expecting to buy a home if they were to move in the next three years is down from a year ago. This is the first time this data point has fallen since the New York Fed began conducting this annual survey in 2014.

The decline was driven primarily by renters, as the percentage of renters who expected to buy a home if they had to move in the next three years fell nearly 10 percentage points. Notably, less than 50% of renters expect to own a home in the future.

Some tenants are playing a waiting game. A plurality of 42% of respondents indicated that they were holding back on the purchase in the hope that house prices will fall. But for many tenants, their pessimistic view boils down to this: the rent is too high, and it’s going up.

Households were anticipating an average rent increase of 11.5%, according to this year’s survey. Last year, they forecast only a 6.6% increase in rents.

“This is consistent with the idea that near-term rent expectations are shaped by the large rent increases that have occurred in recent months.”

— New York Federal Reserve Researchers

“This is consistent with the idea that near-term rent expectations are shaped by the large rent increases that have occurred in recent months,” the New York Fed researchers wrote.

At the same time, the percentage of existing homeowners planning to buy their next home has also declined. The survey found that households’ view that owning a home was a good financial investment has weakened slightly.

The survey was conducted in February – and that time may have shaped respondents’ thoughts on other topics. Households told researchers they expect house price growth to accelerate in 2022, with respondents expecting a 7% increase in their postcode. Last year, surveyors expected only a 5.7% rise in house prices.

“This increase, despite a nationwide increase in mortgage rates since the summer of 2021, reflects strong home price momentum over the past 18 months,” the researchers wrote. Expectations for home prices over the next five years have not changed much, however, indicating that Americans expect the housing market to moderate.

Households were expecting house price growth to accelerate, despite the fact that mortgage rates have been rising since last summer. But the past month has seen a historic rise in interest rates, and mortgage rates are now at the highest level in more than a decade. Most housing analysts expect home price growth to slow for the rest of the year, given the affordability constraints many buyers now face.