Setting foot on the property ladder has traditionally been considered a milestone of adulthood, but between rising inflation and stagnant wages, do renters still aspire to own a home - and, more importantly, can they afford to? We decided to find out. We asked 1,257 US renters a set of simple questions - here’s what we discovered.
Expectations to buy a property
Over half of the renters who took the survey (55%) wonder if buying somewhere will ever be possible - 18% said they don’t expect to buy and 37% were unsure. The top reasons given for this hesitancy were, no surprises, all grounded in affordability rather than choice: not being able to save for a down payment, not earning enough to qualify for a mortgage and having a poor credit score.
For those who felt more positive about getting on the property ladder, their top motivations were more emotional - they wanted somewhere to call home and have long-term financial security. When we asked how they expect to afford the down payment, the top 5 things people said they planned to cut back on were:
- Eating out
- Vacations/weekends away
- Buying clothes
- Socializing
- Drinking alcohol
It’s not just about cutbacks
For many renters, making cutbacks isn’t enough. Some are having to find other ways to cover their rent.
- 43% have a second job
- 35% have borrowed money from friends or family
- 28% have used credit cards
- 16% rely on loans
- 10% stopped paying for health insurance
- 7% sold their car
- 7% rehomed a pet
Why affordability matters
The post-pandemic rush for rentals forced rents to record highs in almost every major US metro area. Despite the market cooling, rents never came back down again. As a result, renters are spending disproportionate amounts of their income on rent.
In the same survey, 77% of people said they spend more than 30% of their take-home pay on rent, and 40% spend more than half. With housing costs outpacing wage growth, renters are struggling to save for the future and are questioning if owning their own home will ever be on the cards.
Why age makes a difference
Interestingly, homeownership expectations decrease dramatically as renters get older. While 50% of roommates under 30 expect to be able to buy a home some day, this drops to 33% among over 40s.
Affordability was already a big issue before the pandemic, but roommates have become increasingly rent burdened and therefore are faced with a tough choice - do they compromise where they live, and the quality of the home they live in, to save towards a down payment on a home?
Under 30s seem optimistic about their chances of eventually owning homes, but combined with the high cost of living and the plummeting faith of renters over 40, it makes it hard to believe that these expectations are aligned with reality.
The question we have to start asking is what happens to a generation who retire without having built an asset through homeownership, who also haven't been able to save? If not addressed by lawmakers, this will have long-term consequences beyond the housing market.