Homeownership remains out of reach for many Americans, survey says

High home prices and rising mortgage rates are making the dream of homeownership unattainable for many Americans, a recent survey said.

Only 53% of U.S. adults believed they would have a home one day, the survey from Divvy Homes said. Moreover, the average respondent thought it would take at least three years to reach the goal of owning a home, and a third said it would take them five years or more. Twenty percent said they would never be able to afford one.

Mortgage rates have hovered between 6% and 7% this year, reacting to economic data and the Federal Reserve's interest rate policy. The central bank has already raised rates 10 times in 2022 and 2023 to bring inflation down to a 2% target. In June, it announced a much-anticipated pause on interest rate increases following continued moderation in inflation.

Even a slight fluctuation in rates can put homes out of reach for many. In June, buyers paid an average 6.6% borrowing rate and spent roughly $2,400 on monthly mortgage payments, according to Candor's June Mortgage Intelligence Report. That's an increase from the approximately $2,300 they paid the previous month when the average 30-year mortgage rate was 6.5%.

Over half (52%) of survey respondents said the current housing market is unstable. While 46% believed "things will level out within the next two to five years;" 17% felt the market “will never return to stable, affordable levels,” according to the survey.

“Potential buyers are looking for alternatives to traditional mortgage financing or are stuck waiting for a reprieve from the rising rates and prices that keeps so many of them renting and locked out of homeownership,” Divvy Homes Co-founder and CEO Adena Hefets said. "There are so many factors putting downward pressure on a potential homeowner's buying power — high-interest rates, a lack of supply, increasing cost of living — that the starter home seems to be on the verge of extinction."

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Home prices are climbing too

Home prices have skyrocketed in sync with rising mortgage rates over the past two years. This year, however, price appreciation began to ease, but there are signs that that trend may soon reverse, according to analytics company Black Knight.

The seasonally adjusted Black Knight Home Price Index (HPI) rose 0.7% in May, hitting a new record high, with the pullback in prices late last year now fully reversed itself. Twenty-seven of the 50 largest markets – primarily in the Midwest and Northeast – have returned to their prior home price peaks or set new highs this spring.

"There is no doubt that the housing market has reignited from a home price perspective," Black Knight Vice President of Enterprise Research Andy Walden said. "Firming prices have now fully erased the pullback we tracked through the last half of 2022 and lifted the seasonally adjusted Black Knight HPI to a new record high in May. Though the backward-looking annual growth rate dipped to 0.1%, May's exceptionally strong +0.7% month-over-month gain would equate to an annualized growth rate of 8.9%, suggesting the annual home price growth rate would remain at or near 0% for only a short time before inflecting and trending sharply higher in coming months."

Rising home prices are just another factor putting the dream of homeownership out of reach for many Americans, according to the Divvy survey. Respondents said they would need to earn an average of $76,000 a year to afford a starter home and that they'd need at least $45,000 in savings to afford the down payment on a starter home, according to Divvy.

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How Americans are working towards the goal of owning a home

Nearly half of respondents (44%) said they are willing to get a second job or side gig to get closer to affording a home, the survey said. Beyond a second income, here are the five ways that many Americans said they could afford to buy a home:

• 50% said improving their credit score
• 40% said winning the lottery
• 34% said getting a raise or promotion at their current job
• 33% said paying down debt
• 26% said inheriting money from someone

"A majority of aspiring homebuyers feel that homeownership is always just beyond their reach, that the 'American Dream' of homeownership is slipping away, and that it would take luck, extraordinary circumstances, or a serious change in the mortgage process to make it possible for them to own a home in today's economic climate," Hefets said.

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