U.S. renters seeing chance of owning a home at record low, N.Y. Fed survey shows

US renters are more pessimistic about their ability to ever own a home and households’ expectations of home-price growth has reaccelerated after falling last year, a new Federal Reserve Bank of New York survey showed.

Amid elevated prices, high mortgage rates and difficulty saving money for a down payment, only about four in 10 renters think that they will be able to buy a home, the New York Fed said Monday. That’s the lowest level since the survey on consumers’ housing-related experiences and expectations was started a decade ago.

For the first time, half of younger renters - those under age 50 - don’t think they will be able to buy a home. In the past year, the share of renters in the Northeast think their probability of buying has dropped in half, from 51% to nearly 26%.

Expectations about the change in the cost of rent rose sharply from last year, according to the survey conducted in February. Rental costs are expected to increase by 1.5 percentage points to 9.7% for the next year, which reversed last year’s decline. Over the next five years, average rent expectations are at 5.1% per year, outstripping projections for wage growth.

And more renters’ think obtaining a mortgage is “somewhat or very difficult” in the latest survey. Renters’ views on the ease of obtaining a mortgage “deteriorated substantially,” according the the Fed. Close to three quarters say obtaining a mortgage would be a problem compared to about half before the pandemic.

A large share of homeowners expect to stay put too. Average expectations of residential mobility - the likelihood of moving to a different primary residence - fell to new series lows at both the one-year (13.4%) and three-year (24.5%) horizons, continuing a declining mobility trend, according to the survey.

US mortgage rates are expected to rise further which will increase the difficulty in buying a home. Households expect mortgage rates to rise to 8.7% a year from now and increase to 9.7% in three years’ time, both of which are survey series highs. If these levels prove to be correct, they would be the highest rates since the early 1990s.

Consumers expect that home price levels will increase too. Home prices over the next five years are expected to rise at a 2.7% annualized rate, roughly in line with inflation expectations.