Real estate grapples with affordability crisis as aspiring homeowners stifled by cost of living, low incomes
Bankrate survey finds 51%+ would-be homeowners feel living costs, incomes pose challenges to affordability
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Though another Great Recession may not be in America’s economic cards, a recent Bankrate survey has signaled "daunting" sentiment around homeownership.
"When you see that more than half of those who would like to buy a home, say... the cost of living is too high, or their income isn't high enough for them to actually accomplish what they would like to do, that's pretty daunting," Bankrate chief economic analyst Mark Hamrick told FOX News Digital.
"[That’s] more than half basically saying: it's our dream to buy a home, but right now, we don't see how that's going to happen."
Reflecting real estate’s volatile pricing and rates over the past year, Bankrate’s new down payment survey found that more than half of aspiring homeowners feel the cost of living (51%) and constrained incomes (54%) pose as obstacles to home-buying plans.
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"That's a combination of the high interest rates that are out there with mortgages back about 7% recently, having peaked above eight in the fall of last year, but having been as low as the high twos and low threes a few years ago," Hamrick explained. "And then, of course, the fact that home prices continue to rise."
Bankrate's Down Payment Survey found that 20% of respondents say they will "never" anticipate saving for a home down payment. (iStock)
With U.S. median home sale prices just below $400,000 and the average down payment rate at around 15%, the Bankrate economist estimated moving costs to be around 25% of your annual income.
"Home purchase needs to work together with the other goals that we need to accomplish, which include emergency savings, includes retirement savings and paying down or paying off debt," Hamrick said. "That opportunity to own a home also coincides with the opportunity to, or requirement to spend money on other things, because there are other costs associated with homeownership that can conflict with those other goals."
Instead of another housing crisis similar to the 2007-08 crash, Hamrick noted that the U.S. markets currently find themselves in a housing "affordability" crisis.
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"We have income inequality. And for those who are on the positive side of that, that is sort of the part of home sales which are proceeding… a place like the state of California, a starter home could be $3 million. And that's a bridge too far for most homeowners," he said.
The survey also reported that 20% of respondents say that they will "never" anticipate saving for a down payment – the largest percentage of any other answer choice. Reasons why some households may never enter homeownership include mobility costs, employment security or civil instability, according to the economist.
"There's always going to be some impediment to homeownership for a certain part of the population, or else we would have zero renters in the country," Hamrick reflected.
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Looking ahead one year from now, Hamrick acknowledged Americans are still living in a "high degree of uncertainty," while predicting Fed rates come down in the second half of 2024. Real estate markets could see a boost if the 30-year fixed mortgage rates dips below 6%, he added.
"It's not really going to be tremendously useful for people to try to time their purchases if they're in the market for a home," Hamrick advised. "Every little bit helps when it comes to affordability. But, barring an economic crisis, which would be associated with a recession or a severe recession, it's hard to imagine that we get mortgage rates back down to the high twos and threes. That's when you really have to sort of stress to come up with a plausible scenario where we get mortgage rates back down there."
