While many renters fear the longer-term consequences of renting on their financial futures, they are simultaneously unable to access the housing market due to high interest rates and prices.
According to the Homebuyer Insights Report from Bank of America, 70% of renters feel they are not making a long-term investment for their future. Seventy-two percent of renters also fear that rent increases could affect their current and long-term finances.
While 4 in 5 respondents believe renting is temporary and suits their current life stage, higher interest rates and home prices are adding uncertainty to the home buying landscape. Three-quarters of respondents to the Bank of America survey plan to buy within the next five years, though 57% are unsure whether it is a good time to buy.
In the same survey conducted a year ago, only 48% of respondents were uncertain about whether it was a good time to buy. Among first-time home buyers, 62% of respondents expressed uncertainty surrounding the housing market.
“Given the highly competitive home buying market, renters are unsure whether now is the right time to buy,” says Matt Vernon, head of consumer lending at Bank of America. “That said, our research continues to show that the vast majority of prospective home buyers overwhelmingly feel buying a home, now or in the future, is the best decision for them in the long run.”
Bank of America’s quarterly On the move indicates a further complication in the housing market: Population flows, particularly to markets in the South, are putting pressure on both housing and rental supply. The Bank of America Institute finds that while housing supply has increased in some areas in response to in-migration, the supply of rental properties in some regions may not be sufficient to account for growing populations.
The results of the survey indicates that a majority of both homeowners and prospective home buyers agree on the financial and emotional benefits of homeownership. Two-thirds of renters feel they are “losing out” on such benefits by renting rather than owning.
Approximately 89% of homeowners said the idea of owning brings emotional fulfillment rather than added stress, and 67% of prospective home buyers would prefer to own a home for the sense of permanence and emotional stability rather than enjoying the “flexibility” of renting. Nearly 60% of respondents said owning a home is the best long-term decision for them, according to the survey.
Generationally, baby boomers are most likely to believe it is better to rent than own in the current environment, according to Bank of America. Four in five baby boomers believe it is better to rent, with a majority appreciating the freedom from property maintenance, the reduced financial responsibilities and stressors, and the flexibility and mobility offered by renting.
In addition to the economic conditions making accessing the housing market difficult, many prospective buyers also expressed a lack of confidence in their knowledge to embark on the home buying journey. Forty-one percent of respondents are not confident in their understanding of how to finance or secure a mortgage or of interest rates in general. Thirty-nine percent of prospective buyers are not confident in their understanding of terminology, and more than half lack confidence in their understanding of grant programs.
Two-thirds of current homeowners also shared they would have done something different when buying their first home, including saving more for a down payment, spending more time shopping around for their home, considering other neighborhoods, and saving money for new appliances or updates.
A total of 2,000 respondents—1,000 homeowners and 1,000 renters—participated in the Homebuyer Insights Report, conducted by Sparks Research on behalf of Bank of America.
This story appeared on Builder Online
