Nearly two in five renters don’t see a path to buying a home
The dream of homeownership is becoming increasingly elusive for many Americans, but not for Gen Z renters.
Nearly 38% of US renters believe they will never be able to afford a home, up from 27% less than a year ago, according to a recent Redfin report.
Gen Z renters are the most optimistic about their chances, with only 8% believing they will never become homeowners. This contrasts with 22% of Millennials, 40% of Generation Xers, and 81% of Baby Boomers who think homeownership is out of their reach.
The disparity between generations can be attributed to the early career stages of adult Gen Zers (aged 18-27), who have more time to eventually become homeowners compared to older cohorts who may have already owned a home or be on fixed incomes.
“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,” the report explained.
Homeownership hurdles
Lack of affordability remains the primary barrier to homeownership. Nearly half (44%) of renters who doubt their prospects of buying a home cite the high cost of available properties as the main reason.
Other significant obstacles include difficulty saving for a down payment (35%), high mortgage payments (33%), and elevated mortgage rates (32%), while 14% of renters simply aren’t interested in the responsibilities of homeownership.
“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.
To afford a typical starter home, first-time buyers must now earn approximately $76,000 annually – an 8% increase from a year ago and nearly double pre-pandemic levels.
Renters feel the squeeze
The affordability crisis extends beyond aspiring homeowners. Many renters are already struggling with their current housing costs.
Read more: How are homebuyers viewing the current mortgage market?
Nearly one-quarter (24%) of renters regularly struggle to afford their housing payments, and an additional 45% say they sometimes struggle to do so. The surge in demand for rentals during the pandemic, coupled with the recent spike in asking rents (now near $2,000, close to the 2022 record high), has significantly burdened renters.
“While owning a home is usually a sound long-term investment, the barriers to entry and upfront costs of buying are higher than renting,” Fairweather said. “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.”
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