Here’s Why More Renters Aren’t Buying the American Dream of Home Ownership

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At the top of the latest housing survey from a Federal Reserve Bank branch sits a cheery headline: “Housing continues to be viewed as a good investment.”

It’s not so cheery in you dig into the data behind Federal Reserve Bank of New York’s annual Survey of Consumer Expectations Housing Survey, released last week.

The percentage of U.S. renters who are unwilling to consider buying a home jumped from 16.1% to 19.2% between 2017 and this year. That number is the highest its been since the survey launched in 2014.

A great deal of the change comes from older folks.

The ratio of people 50 and older who want to buy a home declined to about 67% this year from 74% in 2016. That makes sense considering you might not want to take on a 30-year-mortgage when you’re older.

But if you look deeper into the responses to the New York Fed’s questionnaire, you’ll see a bigger problem that is all too familiar to us at The Penny Hoarder: Many people can’t afford to even consider buying a home.

The Crux of the Problem

So why aren’t renters jumping at low mortgage rates and prodding from financially savvy mothers-in-law to buy a home and start building equity?

Nearly half of those surveyed in the New York Fed’s annual housing study cited too much debt and a lack of savings as reasons they wouldn’t be jumping into the housing market. That number is up from 39.9% in the 2017 survey.

And we all know wages have been lagging employment growth. Last year, 40% of those surveyed said they don’t make enough money to start house hunting, while 47.1% said the same in 2018 — a staggering seven-percentage-point increase.

Renters are also increasingly worried about their credit, as the number of folks responding that they didn’t have good enough credit to buy a home jumped to 38% from 20% in 2017. And the percentage of renters who think getting a mortgage would be very difficult grew 12 points during the same time period.

And here’s the kicker: Renters say they aren’t very concerned about housing prices dropping or their job security. In other words, debt is killing the American dream for many renters, not the economy.

How to Solve the Problem

Luckily, at The Penny Hoarder we specialize in all the stuff that appears to be holding renters back from home ownership.

First, about those savings. Living paycheck to paycheck is stressful, but with everything from micro-investing to online banking, there are several ways to save $1,000 and break that cycle right now.

Do you have 13 minutes? Of course you do. It’s Monday, which means you should be slacking off and daydreaming of next weekend.

Well, take 13 minutes and start planning to pay off your debt, and you could be on your way to getting into the housing game.

Reducing your debt should get you on the road to improving your credit score, but there is another secret weapon you should consider: Credit Sesame. The online service, which breaks down your credit to offer tailored advice on improving it, even helped this Florida couple recover from the housing crisis.

As for problems making enough money, we’ve got you covered. Form online surveys to side gigs, there are plenty of ways to make $500 this month. And there are always opportunities available for a new job on The Penny Hoarder Jobs page on Facebook.

And once you straighten out your finances, make sure you can actually afford to buy a home. Because, once you do, you’re in it for the long haul.

Alex Mahadevan is a data journalist at The Penny Hoarder. He bought a house last year and spends most of his weekends doing yard work. Yay.