Just 6% Of Potential Buyers Plan To Purchase This Summer
With affordability at its worst level in more than three decades, most Americans are putting off buying a home until rates fall.
Only 6% of Americans interested in buying a home are planning to do so this summer, with the majority waiting for interest rates to drop, according to BMO’s Real Financial Progress Index. Just 4% say they expect to buy in the fall.
High rates, low inventory, and sky-high house prices are keeping potential buyers on the sidelines. Of those who don’t currently own a property, 65% are holding off due to the state of the economy.
In the current high-rate environment, affordability is an insurmountable challenge for many buyers. As of May, each of the 100 largest U.S. markets is less affordable than its own long-term average. It now takes 34.2% of the median household income to make principal and interest payments on a median-priced home with 20% down and a 30-year fixed-rate mortgage. The threshold for being housing cost burdened is 30% of a family’s income.
Asian Americans and Hispanics are the most likely groups to say they’re waiting until conditions improve to buy, at 68% and 70%, respectively.
“It’s crucial, especially in higher-rate environments, for Americans to talk to a mortgage advisor who can help prepare buyers for the homebuying process, work to determine how much a person can afford, and clear up the misconceptions about the many paths to homeownership that exist,” said Thomas Parrish, Head of U.S. Retail Lending Product Management at BMO.
Refinances are faring even worse, with 81% of homeowners planning to wait.
Financial anxiety overall is incredibly high, but housing is the main source of stress. Millennials and Gen Z feel the most anxious about buying a home, citing housing as a “top societal concern.”
More than half of these two generations feel like homeownership is more out of reach for them than when their parents were the same age.
“Most Americans understand how critical it is to establish a financial plan and our survey found three in four have set personal goals around money. Unfortunately, only 32% of Americans said they were meeting with their banker or financial advisor to help reach those goals,” Paul Dilda, Head of U.S. Consumer Strategy at BMO, added.
“Regularly doing so will help ensure a secure plan and is imperative to reaching bigger financial aspirations, such as buying a home.”