A recent survey conducted by the Federal Reserve Bank of New York has revealed that Americans are preparing for a continued climb in housing costs, with renters particularly concerned about their fading prospects of homeownership. The Survey of Consumer Expectations, which provides insight into Americans' views on the economy, housing, and inflation, indicated that respondents anticipate larger near-term increases in rent and home prices.

According to the survey, participants expect home prices to rise by 5.1% a year from now, marking a significant increase from the 2.6% predicted a year earlier. However, the outlook for five years from now is slightly more moderate, with a projected home price increase of 2.7%, down from 2.8% in the previous year's poll.

The rental market also appears to be facing upward pressure, with respondents estimating that rental costs will jump by 9.7% a year from now, representing the second-highest forecast in the survey's history. Looking ahead five years, the respondents see rent growth stabilizing at 5.1%.

Mortgage rates, which are already elevated, are expected to rise even further, with predictions placing the average rate at 8.7% a year from now and 9.7% in three years. These projections are at record levels, and significantly above the 7.22% average 30-year fixed mortgage rate reported by home lender Fannie Mae as of May 2.

The report also highlighted a concerning trend among renters, with a record low number of respondents believing they have a good chance of buying a house in the future.

Furthermore, the New York Fed's report noted that the current high mortgage rates are discouraging homeowners from moving, as many are reluctant to give up the low rates secured during COVID. An accompanying blog post from the bank revealed that nearly half of the respondents see less than a 10% chance of moving within the next three years due to the expenses associated with purchasing a new home.

NY Fed Survey

Reuters Article