Many prospective homebuyers fear the long-term consequences of renting, including 70% who feel they’re not making a long-term investment in their future, and 72% who worry that rent increases could affect their current and long-term finances, according to a Bank of America (NYSE: BAC) Homebuyer Insights Report (HBIR), “conducted in partnership with Bank of America Institute.”
However, with higher interest rates and home prices, “uncertainty over whether to keep renting or to buy a home in the current market has grown.”
Today, 57% of respondents are “unsure whether it’s a good time to buy, compared to 48% at this time last year.”
This trend is even more prevalent “among first-time homebuyers, as 62% shared they’re unsure what to do.”
Matt Vernon, Head of Consumer Lending at Bank of America, said:
“Given the highly competitive homebuying market, renters are unsure whether now is the right time to buy. That said, our research continues to show that the vast majority of prospective homebuyers overwhelmingly feel buying a home, now or in the future, is the best decision for them in the long run.”
These decisions are further complicated by “the continued population flows across the United States.”
In its quarterly On the move publication, Bank of America Institute notes “that cities in the South continued to see large inflows of people as of the first quarter of 2024, often fueled by the younger generations.”
The Institute finds that while housing supply “has increased in response to population change, the supply of rental properties in some regions may not be sufficient to account for growing populations.”
Against this background, while 37% of respondents in the HBIR say “renting is the better choice right now, they still plan to take steps towards buying a home in the near future.”
Among prospective buyers, 81% said “that renting is temporary and suits their current stage in life, and 76% are planning to buy a home within the next five years.”
New insights from this research show “that most homeowners and prospective homebuyers agree on the many financial and emotional benefits of homeownership—benefits that two-thirds (66%) of renters feel they’re losing out on.”
- 89% of homeowners said that the idea of owning a home brings emotional fulfillment rather than added stress
- 67% of prospective homebuyers would prefer to own a home for the sense of permanence and emotional stability it provides, rather than the flexibility of renting
- 58% of prospective homebuyers said that owning a home is the best long-term decision for them to have control over their own living space
However, baby boomers are an anomaly.
Today, 80% of baby boomer renters believe “that it’s better to rent than to buy a home in the current environment – up from 63% a year ago.”
This can be attributed in part to the fact that baby boomers say:
- They appreciate the freedom from property maintenance and repair work that renting offers (90%)
- They prefer to avoid the financial responsibilities and stresses associated with homeownership (87%)
- And 83% value the sense of freedom to move when and where they want to that comes with renting instead of owning a home
Exacerbating the difficulties presented by higher interest rates and home prices, many prospective buyers feel that they lack the confidence needed to begin their homebuying journey, and don’t want to make a mistake.
- 41% are not confident in their understanding of how to finance or secure a mortgage
- 41% are not confident in their understanding of interest rates
- 39% are not confident they understand homebuying terminology
- 53% are not confident in their understanding of homebuying grant programs
As noted in the update, Sparks Research conducted a national online survey “on behalf of Bank of America between March 5th and March 18th, 2024.”
A total of 2,000 surveys (1000 homeowners / 1000 renters) were completed “with adults 18 years old or older, who make or share in household financial decisions, and who currently own a home/previously owned a home or plan to own a home in the future.”
In addition, 200 additional surveys were “conducted with first time homeowners (for a total of 615 responses), and 200 additional surveys were conducted with prospective first-time homeowners (for a total of 972 responses).”
The margin of error for the national quota “is +/- 2.2 percent at the 95 percent confidence level.”
Select questions allowed respondents “to choose more than one answer, resulting in responses that may equate to more than 100 percent.”
