- More than half (54%) of American renters don’t believe they will ever be able to own a home.
- 37% of renters are having to sacrifice necessities to pay their rent.
- 22% of renters say they can no longer afford to pay rent, while 21% say they are dependent on money from family to pay their rent.
We’re living through turbulent times as inflation persists and recession fears climb. But that’s not the only thing climbing. With mortgage rates hovering near 20-year highs and rent prices soaring, many Americans are being priced out of housing. According to a recent study conducted by Qualtrics on behalf of Credit Karma, 22% of American renters say they can no longer afford to pay rent, while another 37% say they are sacrificing necessities like groceries, bills and utilities, to pay their rent. Sadly, this adds up when you consider 56% of respondents say they spend a majority of their income on rent, potentially leaving little left over for other expenses.
If rents are high, should I just buy?
The age-old decision whether to rent or buy may be exacerbated by elevated rent prices. According to the study, 65% of respondents who are in the market for a home, say they feel motivated to buy because their rent is so high. This could indicate some people feel pressure to buy – even if they’re not ready – because they cannot come to terms with how much they are paying toward rent.
This feeling of desperation could also explain why 71% of respondents who are in the market for a home say they’ve had to adjust their expectations when it comes to how much home they can afford, including making compromises on factors like home size, home condition, neighborhood, etc. This could be the result of high mortgage rates, which have limited the amount of home Americans can buy, as was the case for 67% of house hunters.
Homeownership dreams falter as the cost of living crisis persists
First-time home buyers have been up against affordability challenges since the early days of the pandemic, but the promise of one day owning a home has gotten further out of reach for many. According to the study, more than half of renters don’t think they’ll ever be able to afford a home (54%). This is a stark contrast to how renters were feeling more than a year ago when all respondents said they were confident they would one day own a home.
The top driving factors behind Americans’ growing uncertainty about one day becoming a homeowner include high mortgage rates (55%) and inflation (53%). Although, it’s not just high mortgage rates and inflation slashing peoples’ homeownership dreams. According to the study, 43% of people who do not own a home, and are not currently in the market for one, say they are holding off on buying a home because of a potential recession, with another 35% saying they’re worried about their job security. For others, mortgage rates would have to drop before considering purchasing a home (41%).
When times get tough, family is a crutch
When you figure more than half of Americans report living paycheck to paycheck right now (55%), it’s no surprise that American consumers are leaning on family and friends more than ever when it comes to housing support. According to the study, 21% of renters say they have to move in with family and friends because they can no longer afford rent, and another 21% of renters are dependent on money from their families in order to pay rent. Younger generations are most dependent on their families for financial support with 39% of Gen Z saying they are dependent on money from family to pay for rent, followed by millennials (26%). The same goes for those in the market for a home as one-in-three respondents who are in the market for a home right now say they are dependent on money from their family to afford a home (34%).
Help from family is great, but it’s not an option for everyone. Instead, many Americans are having to reconsider where they call home. Unaffordable housing across the rental and housing market has 36% of Americans considering moving out of the city in which they currently live to save on rent or mortgage payments.
“Affordable housing should be a basic human right, yet several economic challenges are leaving many Americans vulnerable. While it’s expected for the housing market to be unpredictable during times of economic uncertainty, the rental market has also experienced turbulence with rent prices rising nationally — and quickly,” said Colleen McCreary, consumer financial advocate at 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. 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. 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. Remember, market conditions aren’t permanent and it should correct itself, you just have to do your best to stay the course.”
This survey was conducted online within the United States by Qualtrics on behalf of Credit Karma from October 26-31, 2022 among 1,008 adults ages 18 and older.