Americans are more concerned with rising home prices than a recession, survey shows

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Three-quarters of Americans see owning a home as part of building wealth. But as interest rates rise and recession talk continues to brew, they’re also adjusting their homeownership timeline

TL;DR: 

Rising home prices are more likely than recession concerns to scare potential homebuyers away from the market – for now.
Yet 3 in 4 Americans surveyed still see owning a home as part of building wealth – it’s a piece of a puzzle that also includes a 401(K) and investment accounts.* 
Members of Gen Z are the most likely generation to say they’ve put off buying a home indefinitely.

Last year it seemed that buying a home was all the rage. With interest rates still hovering at historic lows and stimulus checks helping to boost savings for those that were able to hold on to their job during the pandemic, scrolling Zillow became the new national pastime.

That was then, this is now. The country may have happily binged the latest season of Stranger Things, but rising inflation levels last seen in 1981 is a piece of 80s nostalgia many wish could have stayed in the past. Another blast from the past potential homebuyers aren’t too happy about? Rising interest rates, which at 5.89%, are now at their highest level since 2008. That means a new mortgage payment in September 2022 is hundreds of dollars more than one taken out in 2021.

Faced with the choice between outrageously priced Eggos on their grocery bill or saving for a mortgage, the debate is rising on the pros and cons of buying a home vs. renting.

Have rising interest rates and looming talks of a recession caused Americans to give up the  quintessential “finally made it” dream of homeownership? Personal Capital partnered with Morning Consult on a survey to find out.

Americans still value homeownership, but are likely to see it as one piece of a bigger financial picture

Three in four Americans surveyed still see homeownership as part of building wealth, but they were more likely to see it was one of many ways to build wealth (43%) than an “important” part of building wealth (30%), according to the survey.* 

While nearly a quarter of Gen Z (22%) said they saw homeownership as unattainable, Gen Xers and younger Boomers (those aged 45-64) were the most likely to say they weren’t interested in buying a home at all (26%).

Home prices were a bigger concern for prospective buyers than a recession

More than 75% of Americans predict a recession within two years, but an economic downturn surprisingly wasn’t the biggest concern impacting home buying decisions – it wasn’t even the second (that honor goes to interest rates). Across all age groups, approximately 30% of respondents said the cost of homes in their market was the biggest concern impacting their decision whether or not to buy, compared to 12% who listed a recession as their biggest concern. While there may be less competition for homes than there was a year ago, housing inventory remains at historic lows, which continues to push prices higher. In fact, the national price for a home was up 14.3% year-over-year in August.

As a result, one in four respondents say they’ve decided to delay purchasing a home indefinitely. 

Here is where they’re putting their money instead

Retirement account such as a 401(K) or Roth IRA: 42%
High-yield savings account 36%
Individual stocks: 25%
Mutual funds: 20%
Bonds: 12%
Cryptocurrency: 11%
Exchange-traded funds: 7%

Just like homeownership, each of these strategies comes with their own advantages and disadvantages. In fact, depending on your personal financial goals, diversifying investments across each of these asset classes can have its benefits. 

Whether you’re saving for the goal of buying a home or are curious about other wealth-building strategies, connecting your accounts to the free Personal Capital dashboard can help you understand your full financial picture. 

Should I wait to buy a home? 

While rising interest rates and escalating home prices present obstacles to homeownership, a “good” or “bad” time to buy a home depends more on your personal financial goals and strategy than attempting to time the market.

“The past few months have shown how quickly the housing market can shift,” says JJ Lester, Certified Financial Planner and a Real Estate Specialist at Personal Capital. “That’s why the decision to purchase real estate often relies more on your lifestyle goals than trying to time the market.”

When weighing whether or not homeownership fits into your financial plans, Lester says there are several things to consider.

“How permanent is your current living situation? A home is a long-term purchase, so it’s important to think through the likelihood that you’ll still be in your current city five years from now,” Lester says. “Life can always change, but if you already have indication you might not be in your area for the long-term, it may not be the best time to buy a home that you may have trouble quickly selling later.”

Next, Lester says to look at your budget to find out how much you can realistically afford each month for housing, whether it’s a rent or mortgage payment. 

“There are few ways to circumvent the impact of higher interest rates on your mortgage bill, but one option is to put down an even bigger down payment than you were planning,” Lester says. “Most listing websites offer a mortgage calculator you can use to determine how much you need to put down to keep your monthly payments manageable. As part of this process, consider your other investments and cash reserves. There are several strategies to build long-term wealth. If buying a home means you won’t be able to build your emergency savings or will have to pause contributions to your 401(K), you might want to consider putting your plans on hold.”

Get a complete picture of your finances, including where real estate may fit in, by using the free Personal Capital dashboard.

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Methodology

 

This poll was conducted September 1-6, 2022 among a national sample of 2210 US adults. The interviews were conducted online, and the data are weighted to approximate a target sample of adults based on gender, educational attainment, age, race, and region. Results from the full survey have a margin of error of plus or minus 2 percentage points.

About Personal Capital

Personal Capital is a digital wealth management company that helps people transform their lives through technology and personalized advice. The company’s free technology provides consumers with a holistic financial picture and is used by 3.3 million people to track $1.4 trillion in account assets (as of 5/31/22). Its wealth management advisors provide expert guidance, and customized strategies, based on a personal understanding of an investor’s financial picture and goals. For more information, visit personalcapital.com.

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