A significant number of prospective homebuyers are apprehensive about the long-term financial implications of renting, according to a new report by Bank of America. The Homebuyer Insights Report (HBIR), conducted in partnership with the Bank of America Institute, reveals that 70% of respondents feel they're not making a long-term investment in their future by renting, while 72% worry that rent increases could affect their current and long-term finances.
However, with rising interest rates and home prices, uncertainty has grown over whether to continue renting or buy a home in the current market. Today, 57% of respondents are unsure if it's a good time to buy, an increase from 48% last year. This trend is particularly prevalent among first-time homebuyers, with 62% expressing uncertainty about what steps to take.
"Given the highly competitive homebuying market, renters are unsure whether now is the right time to buy," says Matt Vernon, Head of Consumer Lending at Bank of America. "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."
The decision-making process is further complicated by ongoing population shifts across the United States. The Bank of America Institute's quarterly On the move publication notes that cities in the South have continued to see large inflows of people as of Q1 2024, often driven by younger generations.
While housing supply has increased in response to population change, rental property supply may not be sufficient in some regions to accommodate growing populations. Despite this backdrop, 37% of HBIR respondents believe renting is currently the better choice but still plan on taking steps towards homeownership soon. Among these prospective buyers, 81% view renting as temporary and fitting for their current life stage; meanwhile, 76% plan on buying a home within the next five years.
New insights from the research highlight that most homeowners and prospective homebuyers agree on the financial and emotional benefits of homeownership, benefits that two-thirds (66%) of renters feel they're missing out on.
However, baby boomers present an anomaly. Currently, 80% of baby boomer renters believe it's better to rent than buy a home in today's environment, up from 63% a year ago. This preference can be attributed to their appreciation for the freedom from property maintenance and repair work that renting offers (90%), their desire to avoid the financial responsibilities and stresses associated with homeownership (87%), and their value for the sense of freedom to move when and where they want that comes with renting instead of owning a home (83%).
Further complicating matters are the difficulties presented by higher interest rates and home prices. Many prospective buyers feel they lack the confidence needed to begin their homebuying journey and fear making mistakes.
"Grants are a valuable resource to help bridge the gap between your savings and a downpayment," shares Vernon. "Meeting with a lending specialist can be a great first step to see if you qualify for assistance programs, such as Bank of America’s down payment and closing cost grants."
However, some buyers do feel they made mistakes during the homebuying process. Two-thirds (66%) of current homeowners said they would have done something differently when buying their first home.
Bank of America is committed to helping prospective buyers through its Community Homeownership Commitment™, a $15 billion commitment aimed at assisting low- and moderate-income homebuyers across the country build personal wealth and family legacy through homeownership.