The Inability to Afford a Down Payment Is Why Renters Keep Renting, According to a New Report from the Federal Reserve
The financial well-being of Americans has declined significantly over the past year, according to a new report by the Federal Reserve. In 2022, 73% of Americans reported doing “at least okay” financially—down five percentage points from 2021. Only 34% of those doing “okay” reported “living comfortably.”
Furthermore, a tight housing market and an increase in mortgage rates are the reasons why renters can’t buy a home.
While 36% of renters said they prefer to rent, 65% reported doing so because they can’t afford a down payment to buy. Plus, 44% percent said they couldn’t afford a monthly mortgage payment, and 40% said they don’t qualify for a mortgage.
Related: Here’s Where Average Monthly Mortgage Payments Are The Lowest in The U.S.
Among the report’s most striking findings is that when asked the highest amount one could spend on an emergency expense using only savings, 18% reported only being able to cover an expense under $100. Sixty-three percent said they could cover a hypothetical emergency expense of $400 (down five percent from the year prior).
Persistent inflation has also impacted spending and financial strain over the past year. Thirty-three percent of Americans noted inflation was the biggest financial challenge in 2022. Nearly two-thirds of people stopped using a product or reported using it less because of inflation, 64% reported switching to a cheaper product, and 51% saw a reduction in their savings in response to higher prices.
Related: Here Are the Cities Where Inflation Is Rising the Most, According to a New Report