One in six aspiring homeowners has now given up on the housing market entirely, according to a new report from Bankrate.
The survey found 16 percent of aspiring homebuyers have given up on purchasing a home in the past five years because they could not find anything they liked or could afford, Bankrate said.
Why It Matters
Homebuyers are feeling increasingly discouraged as home prices remain at record highs and mortgage rates are still well beyond their pandemic lows.
The housing market could be further disrupted if more potential homebuyers opt out completely, shifting home prices and expectations in the long term.
What To Know
Roughly 28 percent of aspiring homeowners said the price of a home in their area was the most important issue when deciding whether to purchase a home.
“U.S. home affordability is at its worst level in decades,” Stephen Kates, financial analyst at Bankrate, said in the report. “The punishing combination of high home prices, low supply and high mortgage rates has caused one in six home shoppers over the past five years to give up completely.”
Gen Z (ages 18-28) especially feel priced out of the housing market, with 54 percent of this age group saying older generations had it better.
However, millennials were the most likely to have given up on purchasing a home in the last five years because they couldn’t find anything they liked or could afford at 22 percent, followed by Gen Xers at 17 percent.
“Why have they given up? Simple math stopped working. Buyers need nearly $117,000 in annual household income to afford the typical U.S. home. That’s prohibitive for most American families,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
“What this reflects is a market that’s fundamentally broken for first-time buyers. 28% say home prices in their area are the most important factor in their decision, which tells you everything. We’re not talking pickiness.”
What People Are Saying
Title and escrow expert Alan Chang told Newsweek: “Housing affordability has been improving in the last several months with the peak valuation growth starting to fade down and normalize. While overall values are still high, they are on a different trajectory than they were earlier this year. With interest rates falling to recent record lows, this seems like an opportunity that many prospective buyers should be taking advantage of. Purchasing a home is the average individual’s largest investment in their lifetime and should not be taken lightly. This decision should be carefully weighed against your finances as well as lifestyle needs.”
Ryan told Newsweek: “We’re witnessing the collapse of generational wealth building. Homeownership has historically been the primary wealth accumulation vehicle for middle-class Americans. When one in six aspiring buyers walk away entirely, you’re creating a generation of permanent renters. A generation that never builds equity, never has collateral for business loans, never passes down assets.”
Jessica Lautz, NAR’s deputy chief economist and vice president of research, told Newsweek: “Unfortunately, first-time buyers have continued to struggle in today’s housing market. While there is more inventory entering the market in recent months, in some areas the new inventory is unaffordable to a first-time buyer and so renting or living with family is the natural default.”
What Happens Next
If Americans are increasingly unable to purchase a home in today’s market, they will lose a major source of wealth accumulation, Lautz said.