Owning a home is still the American dream, according to the latest LendingTree survey. The current state of the housing market, however, is pulling this dream further out of reach for many Americans due to rising prices, low housing supply, and a fragile economy still recovering from the pandemic downturn.
The pandemic has caused immense changes to both the housing market and consumer preferences. WIth the proliferation of remote work during and after the pandemic, more individuals and families are ready to move into a new home with greater space. Not all Americans could make this dream a reality, however, especially those who spend a big portion of their paycheck on rent, making it nearly impossible to save for a home.
A recent survey by Pew Research revealed that 46% of renters are “cost burdened,” meaning they spend 30% or more of their income on housing.
Although 88% of consumers would rather own a home than rent, nearly half of those who rent fear they will never be able to afford their own home. Monthly rent payments tend to run cheaper than monthly mortgage payments, but the latter go toward owning a piece of property.
Still, the process of buying a home is much more complicated than for renting an apartment. Typically, a renter needs to provide three months-worth of rent in advance, a broker’s fee, application fees, and moving costs, which is already a large sum of money. Yet, this amounts to far less than the typical 20% down payment on a house. A majority (54%) of non-owning consumers say the down payment is the primary barrier to buying a home. That jumps to 68% for people who make less than $30,000 a year.
It’s understandable why most consumers would want to own a home, considering the personal and financial benefits. Homeowners generally have stability and comfort, as well as the ability to add home equity to their net worth. They also can customize their home to their liking — the most commonly cited reason, at 63%, for wanting to own a home.
The second most popular reason for wanting to own is stability, at 55%, especially amongst those who have lower income or income that varies every year. This reason was mostly cited by people who make less than $35,000 a year (59%) than by those making $100,000 or more every year (49%).
The current state of the housing market makes the American dream seem completely unattainable; 48% of renters say they’re worried they’ll never be able to own a home. The Gen X generation (ages 41 to 55) has the largest share of consumers who don’t own a home, at 55%. Millennials (ages 25 to 40) are not far behind, with 52% of them sharing the same fear.
LendingTree senior economic analyst Jacob Channel, however, encourages consumers to use renting to their advantage while saving for a home they can afford. “It’s a good option for people who don’t earn a lot of income or who are trying to save money,” Channel says, since renting is typically cheaper — at least in the short term.
Additionally, consumers can try to save their money by limiting their living expenses, exploring smaller down payment options, and understanding what they can afford.
To read the full LendingTree survey on renters who want the American dream, click the link provided.
