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26% of Americans Prefer Renting to Buying: Are Soaring Mortgage Rates To Blame?

For many Americans, owning a home is a dream they work diligently toward, because it represents stability and a movement toward building equity.

However, according to a new GOBankingRates study, as much as 26% of those 1,091 people surveyed actually prefer renting to buying.

Could this be because mortgage rates are on the rise? Real estate experts explain why some folks prefer to stay renting.

Rising Mortgage Rates

Mortgage rates began to increase recently for the first time in months up to a pretty steep 6.79% in June (up from 6.39% in April), according to the National Association of Realtors (NAR).

While the jump is related to a thriving economy, the NAR reports that this threshold is a non-starter for many prospective buyers. Buyers are much more comfortable around the mid 5% or below range. They do predict that these rates could drop down closer to 6% by the middle of next year, but that may not be enough to convince renters to buy.

Higher mortgage rates definitely affect people’s willingness to buy, according to Brian Quigley of Beacon Lending, though it’s not the only reason.

“When rates soar, monthly payments increase, often making home ownership less accessible or appealing,” Quigley said. “However, attributing the shift towards renting solely to rising mortgage rates might be an oversimplification. The modern homeowner is influenced by a myriad of factors, and while rates undoubtedly play a part, they’re just one piece of a larger puzzle.”

A Changing Home Ownership Landscape

Quigley said that in general, the landscape of home ownership has changed dramatically over the years, and many factors weigh into people’s decisions to buy or not.

He said, “The cultural emphasis on home ownership as a rite of passage has waned, particularly among younger generations who value flexibility and mobility.”

Moreover, the memory of the 2008 financial crisis has instilled caution, he explained, “making some wary of the risks associated with owning property.”

Lastly, “the ever-evolving job market, with a shift towards remote work, has reduced the need for a fixed residential location.” 

Affordability Concerns

While owning a home may seem like a great investment in the long run, with mortgage rates on the rise, the cost of home ownership has escalated significantly, said Ben Gold, founder of Recommended Home Buyers.

“Many potential buyers are apprehensive about taking on higher monthly mortgage payments, leading them to opt for the more predictable and manageable costs of renting.”

Investment Diversification

In addition to soaring mortgage rates, Gold explained, “With economic fluctuations, some individuals choose to invest their capital elsewhere rather than tying it up in a home purchase.”

Renting allows them to allocate funds to other investment opportunities that may offer greater potential returns.  

No Guarantees

Additionally, purchasing a home is not a “guaranteed path to wealth” and in fact, such faith in the value of homes has been “dented by the chaos of the 2008 crisis,” said Brett Johnson, owner of Cash For House Pro in Colorado.

“This has prompted people to venture into alternative investment avenues. When you factor in today’s housing market situation – with steep prices and a limited number of homes available — renting starts to make more sense for many individuals.” 

Commitment Issues

However, high mortgage rates may not be the only thing keeping people from sealing the deal on a new home.

According to Dominique Vescuso, real estate broker with Your Home Imagined in California, there are other reasons renters don’t want to take the leap to home ownership.

“There are many renters who never want to own their own home. Some have commitment issues and do not want to tie themselves down to one home or area. They like to be on the move and the freedom to leave when they want,” she said.

Additionally, yet another set of renters do not want to own because they do not want the responsibility of having to care for the home, she explained. “It is so much easier to call the owner or property manager and not have to worry about paying for the issue, taxes, insurance etc. They are responsible for their rent and that is it.”

While the reasons may vary why some renters prefer to stay renting, rising mortgage rates are certainly another mark against home ownership. Nobody wants to commit to a mortgage with steep payments and no certainty of when they can refinance.

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