Have American Renters Given Up On The Dream Of Homeownership?

A recent New York Federal Reserve study shows that a record-low number of renters believe they will ever achieve the traditional American dream of homeownership. The survey focused on renters' hopes of "residential mobility" and asked them how feasible it was for them to ever own a home. This year, the number of renters who believed they would ever own a home fell to a record low of only 13.4% of survey respondents.

In addition to being a record low, it's part of a trend where the percentage of renters surveyed who think they will own a home one day has been steadily declining. In 2023, 15% of respondents believed they would be able to purchase a home. However, as recently as 2014, a full 20% of respondents expressed confidence in their ability to become homeowners.

That was an all-time high. If the current downward trend continues, it's not impossible to imagine less than 10% of renters will report optimism about their homeownership prospects in 2025. The reasons for renters' newfound pessimism are not hard to figure out. High home prices and interest rates have conspired to deliver a sledgehammer-sized blow to many Americans' aspirations of ever purchasing a property.

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Nearly 75% of survey participants said they thought getting approved for a mortgage was "difficult or substantially difficult," and this data point is also trending in the wrong direction. The current high is up significantly from the 66% of renters who expressed the same concerns in 2023 and the 63% rate in 2022. That translates to an almost 20% uptick in survey respondents who see getting a mortgage as a significant obstacle to homeownership.

The survey respondents were also decidedly pessimistic about the prospects that home prices will come down in the future. The consensus among the respondents is that home prices will increase another 5% this year. Their predicted increase in 2022 was only 2.6%. They also expressed very little confidence that the Federal Reserve will be cutting interest rates in 2024.

Consequently, survey participants only see homeownership becoming more expensive in the years to come. Most of them estimated that their rent would go up by 9.7% in the next 12 months, representing a 1.5% jump over their estimates for the previous year. Taken as a whole, these survey results paint a shockingly grim picture of American renters' expectations for their future.

This kind of nationwide pessimism can’t continue indefinitely without having a corresponding negative effect on the economy as a whole. Homeownership has been one of the cornerstones of the American dream for the past several generations. Even Americans who didn't get rich were able to pass on generational wealth to their children, mainly as a result of their access to homeownership.

Previous generations of Americans viewed their apartments as temporary housing. Now it appears as if they have all but thrown their hands in the air and given up on ever being anything but tenants. It is a sad situation that can only be remedied by the kind of partnership between private enterprise and the government that gave birth to the FHA. 

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