Redfin Reports Nearly 40% of Renters Think They’ll Never Own a Home, Up From 27% Last Year

Rhea-AI Summary

Redfin's latest report reveals a significant increase in the number of U.S. renters who believe they will never own a home due to lack of affordability. The survey highlights that 38% of renters share this sentiment, up from 27% a year ago. The main reasons cited for this belief include the high cost of available homes (44%), difficulty in saving for a down payment (35%), affordability of mortgage payments (33%), and high mortgage rates (32%). A notable 14% simply lack interest in homeownership.

Insights

Economist

The sentiment expressed by renters regarding homeownership reflects broader economic challenges. The rise from 27% to 38% of renters doubting their prospects of owning a home signals a significant shift in consumer confidence. This trend may indicate a cooling housing market, as high prices and mortgage rates deter potential buyers. The reluctance to engage in homeownership could reduce demand, leading to a potential stabilization or even a decrease in housing prices over time.

However, this also poses a risk to businesses reliant on a robust housing market, such as construction companies, real estate agencies and mortgage lenders. A prolonged decline in homeownership aspirations could lead to reduced revenues for these sectors. The impact on the stock market may vary, with companies in the housing sector potentially experiencing a decrease in stock prices due to anticipated lower demand.

Market Research Analyst

The data presented highlights a shift in the housing market's dynamics, with affordability being a key barrier. The inability to save for a down payment and afford mortgage payments suggests that a segment of the population is being priced out of the market. This could lead to a re-evaluation of the target demographics for real estate businesses, pushing them to innovate and offer more affordable housing solutions.

From a market perspective, businesses that cater to lower-income renters, such as affordable housing developers and rental property management companies, may see an uptick in demand. Conversely, luxury real estate developers might face headwinds. Investors may seek to adjust their portfolios accordingly, favoring stocks that align with these emerging consumer trends.

Financial Analyst

The survey's findings can have implications for the financial sector, particularly for companies involved in mortgage lending and real estate financing. An increase in renters who believe homeownership is out of reach could lead to a decrease in mortgage loan originations. Lenders might need to reassess their growth strategies and consider more flexible or innovative financing options to attract potential homebuyers.

Furthermore, the reported lack of interest in homeownership among a subset of the population suggests a potential cultural shift. If this trend continues, it could influence long-term market dynamics, affecting the valuation of real estate stocks and funds. Investors should monitor these trends closely to understand the potential long-term impact on their investments in the housing sector.

Lack of affordability is the most commonly cited reason renters don’t believe they’ll ever own a home

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Nearly two in five (38%) U.S. renters don’t believe they’ll ever own a home, up from roughly one-quarter (27%) less than a year ago, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Lack of affordability is the prevailing reason renters believe they’re unlikely to become homeowners. Nearly half (44%) of renters who don’t believe they’ll buy a home in the near future said it’s because available homes are too expensive. The next most common obstacles: Ability to save for a down payment (35%), ability to afford mortgage payments (33%) and high mortgage rates (32%). Roughly one in eight (14%) simply aren’t interested in owning a home.

This is according to a Redfin-commissioned survey of roughly 3,000 U.S. residents, including about 1,000 renters, conducted by Qualtrics in February 2024.

Buying a home has become increasingly out of reach for many Americans due to the one-two punch of high home prices and high mortgage rates. First-time homebuyers must earn roughly $76,000 to afford the typical U.S. starter home, up 8% from a year ago and up nearly 100% from before the pandemic, according to a recent Redfin analysis.

Home prices have risen 7% in the last year alone, and monthly mortgage payments have risen more than 10%, which helps explain why renters today are more likely than they were last year to say they don’t see themselves owning a home anytime soon.

Many renters can’t fathom homeownership because they’re already struggling to afford their monthly housing costs. Nearly one-quarter (24%) of renters say they regularly struggle to afford their housing payments, and an additional 45% say they sometimes struggle to do so.

Rents have soared over the last few years because so many people moved during the pandemic, upping demand for rentals. The median U.S. asking rent is roughly $2,000, near the record high hit in 2022—but the good news for renters is that prices aren’t growing nearly as fast as they were during the pandemic, partly because an influx of apartment supply is taking some of the heat off prices.

“Housing costs are high across the board, but renting is a more affordable and realistic option for many Americans right now—especially those who have never owned a home and aren’t able to tap into equity from a previous sale,” said Redfin Chief Economist Daryl Fairweather. “While owning a home is usually a sound long-term investment, the barriers to entry and upfront costs of buying are higher than renting. Buying typically requires a sizable down payment and approval for a mortgage—things that are difficult for many people today, when the typical down payment is near $60,000 and mortgage payments are sky-high. The sheer expense of purchasing a home is causing the American Dream of homeownership to lose some of its shine.”

Gen Z renters are most likely to believe they’ll own a home

Broken down by generation, Gen Z renters are by far the most likely to believe they will become homeowners. Just 8% of Gen Z renters believe they’ll never own a home, compared to 22% of millennials, 40% of Gen Xers and 81% of baby boomers.

That stands to reason, as adult Gen Zers (aged 18-27) are in the early stages of their careers and have a lot of time to eventually become homeowners. Older generations, especially baby boomers, may have already owned a home and decided to rent for the convenience and low-maintenance lifestyle, or are on a fixed income.

To view the full report, including charts and methodology, please visit: https://www.redfin.com/news/renters-becoming-homeowners-2024

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240412629697/en/

Redfin Journalist Services:

Ally Braun, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What percentage of U.S. renters don't believe they'll ever own a home according to Redfin's report?

38% of U.S. renters don't believe they'll ever own a home.

What are the main reasons cited by renters for not believing they'll own a home?

The main reasons cited include the high cost of available homes (44%), difficulty in saving for a down payment (35%), affordability of mortgage payments (33%), and high mortgage rates (32%).

How many U.S. residents were surveyed for the Redfin report?

Roughly 3,000 U.S. residents were surveyed for the Redfin report.