While there were some expectations that an economic slowdown would lead to cooling home prices and a reprieve for would-be buyers, that's not necessarily what's happening.
If you're a house hunter with affordability as a top priority, the median price of homes rose 2.5% in April 2023 over the previous year. That's coming from the historic high prices we saw in 2022, and many analysts, including the National Association of Realtors, believe that prices will keep going higher for the rest of the year.
The limited availability of affordable homes is paired with many renters who would otherwise be home-shopping, leading them to sit on the sidelines.
Less than one-third of renters say they're considering buying a house in the next 12 months, according to a survey of 2,500 renters and landlords from Avail. That puts around 70% of current renters in a position where they say they aren't even considering buying a home.
This appears to be an ongoing trend, as many renters opt not to buy, at least in the near term.
The top seven reasons for not buying this year, according to the survey results, include:
- Not enough money saved for a down payment
- Thinking they won't qualify for a mortgage
- High-interest rates
- Economic instability
- Don't want the responsibility of taking on a mortgage
- Prefer renting
- Worries about job security
Younger Americans are especially intimidated by the high home prices. A Zillow survey found that 52% of Generation Z and 57% of millennials who don't currently own a home feel they'd have to win the lottery to afford one.
Nearly all Gen Zers and millennials said they'd have to make serious changes in their lives if they ever wanted to achieve homeownership.
Zillow reports that the current housing affordability crisis is the worst in at least 15 years. Zillow reported home values were up overall by 3% during the past year, coming off record-high numbers. During the pandemic's peak, there were double-digit increases in average home value.
The average mortgage payment is now $431 a month more than a year ago because of rising interest rates and soaring home value appreciation.
Around 40% of millennials say they'd need a second or even third job to afford a home, as the situation stands right now. Around 28% of Gen Zers said they'd need to change their career to afford a home.
In the current environment, you'd need to save around $67,000 to afford a 20% down payment on a typical home in the U.S.
The Avail survey did find some positive news for renters, though. The survey results found that fewer independent landlords are planning to raise rent prices in the next 12 months compared to past surveys. Around two-thirds of surveyed landlords (65.1%) said they plan to raise the rent in the next 12 months at one or more of their properties. That's down from October 2022, when the figure was 70.4%.
Landlords cited strong relationships with their current tenants and a desire to avoid turnover as their reasons.
