With mortgage interest rates remaining above 7% as the Federal Reserve keeps its benchmark rate at a 22-year-high, renters’ expectations that they’ll ever own a home dropped to the lowest point since the Federal Reserve Bank of New York started surveying consumers on the question in 2014.
Fitting with that theme, most renters consider it as somewhat or very difficult to obtain a mortgage, according to the New York Fed’s 2024 SCE Housing Survey, part of its broader Survey of Consumer Expectations.Renters’ self-assessed probability of every owning a home dropped by 4.3 percentage points to 40.1%, a series low.
Meanwhile, some 74.2% of respondents said they believe it’s somewhat or very difficult to get a mortgage, 8.4 pp higher than last year and well above the 2021 low of 50.5%.
Regarding inflation, consumers’ average one-year-ahead home price growth expectations climbed to 5.1% in February 2024 from 2.6% in February 2023. While the rise was broad-based, it was particularly large for respondents residing in the South.
Expectations for the five-year horizon, though, remained roughly stable. With annualized home price growth expected to be 2.7%, down 0.1 pp from the 2023 survey.
Expectations for rent increases trended hotter. Consumers’ outlook for rent price growth for the next year climbed to 9.7%, up 1.5 pp and the second-highest reading in the series since 2022. Like, home price growth, annualized expectations for the next five years were roughly flat, edging up to 5.1% from 5.0%.
While the Fed has indicated its next rate move is likely to be a cut, consumers are expecting mortgage rates to continue rising. On average, households perceive that national mortgage rates will rise to 8.7% a year from now and 9.7% in three years, both representing series highs.
Still, households on average believe there is a 61% chance that mortgage rates will fall over the next 12 months, which is also a series high, the New York Fed said.
The outlook for refinancing mortgages appears to have improved slightly. Homeowners’ expected probability of refinancing increased slightly to 6.3% after falling for the last two years. It remains well below the prepandemic average of 10.4%, according to the report.