A recent Bankrate survey revealed that around half of potential homebuyers in the U.S. are unable to afford a down payment and closing costs due to insufficient income and high living expenses. With down payments typically constituting 20% of the home price and closing costs ranging from 3% to 6% of the mortgage loan, these upfront expenses pose a significant financial barrier for most aspiring homeowners. The survey of 864 U.S. adults aspiring or prospective homeowners highlighted reasons such as inadequate income, high cost of living, credit card debt, lack of financial support from family or friends, and student loan debt as key factors hindering their ability to afford a home.
The survey further revealed that only 13% of potential homebuyers feel unrestricted by financial constraints when it comes to buying a home, signaling the widespread challenges faced by many Americans in the current housing market. As home prices continue to surge, the size of down payments is expected to increase as well, making homeownership even more financially out of reach for many individuals. Additionally, with median home prices rising by 16% since 2020, saving up for a down payment has become increasingly daunting for those looking to enter the housing market, especially when considering the median U.S. household income of $74,580 and the additional costs of private insurance required for lower down payments.
Looking ahead, nearly 40% of survey respondents expressed skepticism about the future trajectory of mortgage rates, expecting them to remain elevated in the coming years. While some experts predict a slight decrease in average 30-year fixed rates from 7% to 6% by late 2024, this potential drop may not be substantial enough to alleviate the financial burden on cost-conscious buyers. As the challenges of housing affordability persist, many aspiring homeowners face an uncertain path towards fulfilling their homeownership dreams amid a competitive and rapidly evolving real estate landscape.