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Inflation, higher rates lead 54% of renters to say they’ll never afford a home

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More than half of U.S. renters don’t see themselves ever owning a home, according to a recent survey from Credit Karma — a daunting statistic, considering homeownership remains a key driver of household wealth. 

The survey of 1,008 U.S. adults, conducted by Qualtrics on behalf of Credit Karma  between Oct. 21 and Oct. 31, revealed Americans were primarily uncertain about their homeownership prospects due to high mortgage rates and an increased cost of living, with mortgage rates having more than doubled over the past year and consumer prices up 7.7% in October compared to the same month a year earlier, Credit Karma said.

(It’s worth noting that rates have dipped since the survey period: As of Dec. 1, the average 30-year fixed-rate mortgage rate was 6.49%, compared to the 6.94% rate seen on Oct. 20.)

Renters also reported they were holding off on purchasing a home over concerns of a potential recession or job security. Ultimately, 54% of respondents said they didn’t believe they could ever afford homeownership, according to Credit Karma.

Tenants may also be struggling to save for a down payment on a home, as the national median rent has increased by 21% since March 2020 despite an overall cooling in the rental market in recent months, according to Apartment List. Fifty-six percent of respondents said they spent a majority of their income on rent, Credit Karma said; 37% said they were sacrificing groceries, bills and utilities to cover their housing payments; and 22% said they couldn’t afford their rent at all. 

Yet 65% of the respondents who were in the market to purchase a home said they wanted to buy because their rents were so high, according to Credit Karma.

“While we’re beginning to see signs of a cooling rental market, many Americans are still grappling with ballooning cost-of-living expenses, stagnant wages and high borrowing costs,” Colleen McCreary, a consumer financial advocate at Credit Karma, said in a Nov. 16 statement.

“For renters who are struggling to afford rent, consider modifying your living arrangement or talk to your landlord about your situation, they might be willing to help,” McCreary said. “And for those who are losing hope in one day being a homeowner, focus on what you can control right now. For example, saving a little money at a time toward your goal of one day owning a home.”

Credit Karma’s findings align with trends seen in the Fannie Mae
FNMA,
-5.35%
Home Purchase Sentiment Index — which, despite increasing in November for the first time in nine months, is still near its all-time low, Fannie Mae said Wednesday.

“We expect mortgage demand to continue to be curtailed by affordability constraints, while homeowners with significantly lower-than-current mortgage rates may be discouraged from listing their property and potentially taking on a new, much higher mortgage rate,” Fannie Mae’s chief economist, Doug Duncan, said in a statement Wednesday.

As of 2020, the U.S. homeownership rate was 65.5%, according to a February report from the National Association of Realtors. Black Americans were less likely to be homeowners, though, with a homeownership rate of 43.4% that year, compared to a homeownership rate of 72.1% among white Americans, 61.7% among Asian Americans and 51.1% among Hispanic Americans. 

We want to hear from readers who have stories to share about the effects of increasing costs and a changing economy. If you’d like to share your experience, write to readerstories@marketwatch.com. Please include your name and the best way to reach you. A reporter may be in touch.

Credit: marketwatch.com

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