A recent report from CoreLogic showed that home prices increased 4% year over year in December, and projected the U.S. price index will rise by 5.2% by December 2020.
As home prices continue to rise nationally, it’s little wonder that Freddie Mac’s latest “Profile of Today’s Renter and Owner” found that the majority of current renters believe renting is more affordable than owning.
However, the percentage of renters who hold that belief has increased dramatically in the past year.
A whopping 84% of renters said they believe renting is more affordable than owning – an all-time high for the survey. For comparison, this number is up 17 percentage points from February 2018.
The survey also found that affordability issues affect the average renter more than a homeowner. Freddie Mac said there are 42% of renters who paid more than a third of their household income on rent.
This is compared to only 24% of homeowners who spend that amount on mortgage payments.
But there is good news for renters looking to own. Given current low interest rates, 40% of renters said they plan to purchase a home.
“The housing market is strong and, based on our survey, the low mortgage rate environment may inspire both renters and owners to make an educated move this spring,” said David Brickman, Freddie Mac CEO. “While Baby Boomers tend to be satisfied with their current housing situation, younger generations are still struggling to determine whether to rent or purchase a home, largely due to lack of supply and affordability constraints.”
And that lack of supply stretches beyond single-family housing. Last year saw record-high occupancy rates in multifamily housing with a shortage of supply. Naturally, this drove rent growth. Many of the renters surveyed by Freddie Mac voiced their worry in this area.
Almost 70% of renters said they are growing more concerned about their rent going up in the next 12 months, while 68% are concerned about not being able to afford their larger expenses. Even so, according to the majority surveyed, renting is still the more affordable option.