With an interest rate for a fixed-rate mortgage at more than 7%, coupled with unrelenting high home prices, people in the market for a home are being forced to make tough decisions. Recent analysis, such as that from Realtor.com, report that renting is now a more cost-effective option than buying a starter home in the top 50 metro areas in the US.
Just how many potential homebuyers are bowing out of the market? Here are five key insights highlighting how the current state of the housing market is radically impacting consumer choices.
1. Rentals outweigh home purchases for upcoming movers.
New CivicScience polling data find that 31% of U.S. adult respondents plan to move in the next 12 months. Among those who plan to move, nearly 50% are planning to rent an apartment, condo, house, or townhouse. Just 27% say they plan to purchase a home.
Ongoing data tracking from CivicScience show that at the time of writing, renters are a much smaller segment of the population, at just 22% who rent versus 61% who own homes. As expected, current renters are much more likely than homeowners (three times more likely, in fact) to plan to move in the next 12 months, likely accounting for the high rate of plans to move to a rental property among movers.
Even so, additional data would suggest that more people are turning toward renting in light of a tough housing market:
2. Potential homebuyers aren’t committing to buying.
Among respondents who say they want to purchase a home in the next 12 months or so, 32% are likely to rent instead, while slightly less (28%) intend to pursue their plans to make a purchase. An additional 41% may have hopes of moving to a new home, but are unlikely to move from their current place of residence within the next year.
Of course, this varies by location. People in the West and Northeast regions are the least likely to follow through with goals to purchase a home – those in the Northeast are most likely to remain in their current residence, while those in the West are most likely to rent. In contrast, adults in the Midwest and South are far more likely to continue on with a home purchase.
3. First-time buyers are particularly affected.
First-time buyers make up a significant percentage of the market, yet they are highly likely to postpone ownership in lieu of renting: 47% of people who eventually want to purchase their first home say they are likely to rent instead of buy in the next 12 months, compared to just 14% of homeowners in the market.
An additional 22% say they are unlikely to move from their current home, which ‘home’ could also be interpreted to include living at home with mom and dad – data from the last six months show that 24% of people who plan to purchase a first home say they still live in their family home.
4. Nearly 1 in 5 homeowners are considering selling to rent.
On the other end of the spectrum are homeowners. When specifically asked how likely it is that they will sell their current home and move into a rental property in the next 12 months, a total of 19% said they are at least ‘somewhat likely’ to do so. Six percent are ‘very likely’ (n=2,376 from 10/08/2023 to 10/09/2023).
5. For non-homeowners, the general public sees it as a better time to rent than buy.
With rental prices presumably falling in some areas, it’s understandable that the Gen Pop would skew more toward renting when asked whether now is a better time for non-homeowners to rent or buy a home. A total of 37% believe it’s a better time to rent, up from 33% in July 2022. That’s compared to 19% who say it’s better to buy right now, down from 22%. A plurality (44%) see both options equally (n=2,482 responses from 10/09/2023 to 10/10/2023). Data also show:
- People who live in urban areas are far more likely to see renting as a better option right now for non-homeowners (44%), in contrast to those living in suburban (37%) and rural (35%) areas.
- Younger adults under age 35 are surprisingly more likely to say it’s a better to buy than older adults (23%); at the same time, a greater percentage also think it’s better to rent.
- People who earn over $100K per year are far more likely to say it’s better for non-homeowners to rent (40%+), compared to those who earn less (35%).
All in all, the numbers suggest that consumer demand is significantly unmet and renting is seen as a more viable option, especially among young buyers looking to purchase their first home. The data rounds out findings from August, which uncovered that a high percentage of adults (3-in-4 U.S. adults) in the homebuying market report they are being held back from the purchase of a new home. High interest rates followed by home prices were cited as the top reasons.
To learn how your target consumers are responding to the shifting housing market, get in touch.