Fading American Dream: Nearly 40% of renters don’t believe they’ll ever own a home

Nearly 4 in 10 renters in a new nationwide survey say they don’t believe they’ll ever own a home, up nearly a quarter from less than a year ago.

Rising home prices and mortgage rates continue to discourage Americans from buying a house, with the lack of affordability cited as the top reason renters think they will never own a home among 1,000 renters nationwide in a Redfin report released Friday.

“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.”

Barriers to homeownership

The survey conducted by Qualtrics found 38% of U.S. renters don’t believe they’ll ever own a home, up from 27% of respondents in a Redfin survey in March 2023. The most common obstacles renters cited for not buying include:

Available homes are too expensive (44%).Ability to save for a down payment (35%).Ability to afford mortgage (33%).Mortgage rates are too high (32%).

A Redfin analysis last month found first-time homebuyers must make roughly $76,000 a year to afford a typical starter home, up 8% from a year ago and almost 100% from before the COVID-19 pandemic. Home prices have shot up more than 40% since 2019, due to the pandemic home buying frenzy and a shortage of houses for sale. While the current average 30-year fixed mortgage of 6.82% is less than the 23-year high of nearly 8% last October, it’s still more than double the record low rates in 2020.

Home prices have risen 7% in the last year, 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, according to Redfin. The survey also showed renters already having a hard time with monthly housing costs, with nearly a quarter saying they regularly struggle to afford their housing payments and 45% saying they sometimes struggle.

Choosing to rent

The Redfin survey also found 14% of renters aren’t interested in buying a home.

Data from Utah-based property management software innovator Entrata earlier this month showed more people are renting because they want to, not because they can’t afford to own a home, and 1 in 5 expect to be lifelong renters.

“While there will always be a certain percentage of the population that are renters by default because of their economic situation, steadily more people are becoming renters by choice regardless of economic factors,” according to the report titled “The New American Dream.”

The Entrata survey of 2,000 renters in large apartment communities nationwide conducted in January found 66% say renting fits their current lifestyle more than owning a home. A third say they could afford a home in 2024 that meets their needs but choose not to buy. The survey also found 41% of renters say homeownership has nothing to do with the American Dream.

Homeowners in waiting

Gen Z renters are by far the most likely to think they will someday become homeowners, with only 8% saying they believe they’ll never own a house, compared to 22% of millennials, 40% of Gen Xers and 81% of baby boomers, according to the Redfin survey.

“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,” according to Redfin.

The Entrata data showed renters are also looking to alleviate themselves from the responsibilities that come with home ownership, including yard work and maintenance. Another chunk owned a home and realized it wasn’t for them, according to the report. Some of the top reasons survey respondents cited for beginning to rent again include moving and divorces or breakups. And that varied among age groups. For millennials, nearly half started renting because they moved to a new area, while 38% and 32%, respectively, of Gen X and baby boomers experienced a divorce or breakup.

A Redfin survey of renters found 38% believe they will never own a home.