In Today's Economy, 58 Percent of U.S. Homeowners Can't Afford to Buy Their Current Home

In Today's Economy, 58 Percent of U.S. Homeowners Can't Afford to Buy Their Current Home

Residential News » Seattle Edition | By Michael Gerrity | April 29, 2024 9:02 AM ET

Around 40 percent of U.S. renters also believe homeownership is out of reach

According to a recent survey by national property broker Redfin, almost 58% of U.S. homeowners feel they probably couldn't afford to repurchase their current homes at today's prices and mortgage rates. This insight comes from a survey carried out in February 2024 by Qualtrics, involving approximately 3,000 U.S. residents.

The survey indicates that a significant majority of respondents, 59%, have owned their homes for over a decade, and an additional 21% for at least five years. During this period, these homeowners have witnessed a dramatic increase in local housing prices, with the median U.S. home-sale price doubling over the past decade and rising nearly 50% in the past five years alone.

Home prices have surged due to several factors, including a spike during the pandemic fueled by remote work trends and historically low mortgage rates, which encouraged many to relocate and purchase homes. Even before this surge, prices were climbing due to ongoing supply shortages, a robust labor market, and increasing demand from a growing population.

The rise in mortgage rates compounds the affordability issue, making current homeownership untenable for many. For example, the monthly payment for a median-priced home of about $420,000 at today's 7.1% mortgage rate is approximately $2,864, significantly higher than the $2,210 payment at 2019's 4% rate.

Redfin's Senior Economist, Elijah de la Campa, explains that while rising home values benefit current homeowners, they also make entering or moving within the market increasingly challenging. The cost of a comparable home has escalated, and when combined with high mortgage rates, upgrading or purchasing a new home becomes financially prohibitive for many.

The situation is particularly grim for first-time homebuyers who lack equity from previous home sales. Around 40% of U.S. renters now believe homeownership is out of their reach, a sharp increase from 27% last year. Among those hopeful Gen Zers and millennials planning to buy soon, over a third expect to need a cash gift from relatives to manage a down payment.

By generation, baby boomers are the least likely to afford their current homes if buying today, with nearly half feeling priced out of their own neighborhoods--a figure that far exceeds that of Gen Xers and millennials. This generational gap largely reflects the significant price changes since many baby boomers first purchased their homes. This disparity also contributes to the current housing shortage, as many baby boomers remain in their homes, reducing the available housing stock.

Not surprisingly, affordability struggles are most acute among lower-income homeowners, with over half of those earning under $50,000 annually stating they couldn't afford their current homes, compared to lower percentages in higher income brackets.

Redfin Home Affordability Chart (April 2024).jpg

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