U.S. households expect home prices and rents to continue to rise sharply this year, according to a new survey by the Federal Reserve Bank of New York. While growth in both are then seen slowing, renters, nevertheless see their chances of ever owning a home fading fast
Home prices are expected to increase 7% in the next year, but 2.2% annually on average over the next five years as mortgage rates are seen accelerating, the survey published Monday shows.
Home Prices up 7%; Rents, 11.5%
Meanwhile rents are expected to rise even faster, jumping 11.5% over the next 12 months and increasing 5.2% on average each year for the next five.
Last year respondents to the same survey had expected a 5.7% rise in home prices and a 6.6% rise in rents in the year ahead.
The bottom line for renters was stark: they reported seeing just a 43.3% likelihood of ever owning a home, down from 51.6% in 2021 and the lowest reading since the survey began in 2014.
The Federal Reserve is raising interest rates to cool inflation that is at a 40-year high. Mortgage rates already have risen in anticipation, with the average 30-year fixed rate to 5% last week, up nearly two percentage points since late last year.
Would-Be Homeowners Lose Confidence
An industry survey released earlier Monday showed confidence among U.S. single-family homebuilders falling to a seven-month low in April as rising home-borrowing costs and snarled supply chains boosted housing costs and kept some first-time buyers out of the market.