As nearly 71% of prospective home buyers await rate cuts, 68% say housing costs are causing financial anxiety, according to the latest BMO Real Financial Progress Index.
"In light of persistent strength in the U.S. economy, as well as stubborn underlying inflation, the market has been pushing its expectation for Fed rate cuts into the autumn," says Michael Gregory, deputy chief economist at BMO. "Looking ahead to 2025, we expect the Fed to stick to a gradual rate cut pattern."
Although financial anxiety is high, of those who do plan to buy a home, nearly one-third (30%) say they plan to pull money from their 401(k)-retirement plan to help cover the costs especially younger generations. The survey finds that millennials (31%) and Gen Z (34%) are more likely to say they will pull out money early compared to Gen X (25%) and baby boomers (16%).
This willingness to pull out money from retirement fits hand in hand with the fact that most millennials and Gen Zers (73% for both groups) report owning a home is one of their biggest goals. Overall, 67% of respondents agree that owning a home is one of their most coveted goals yet 73% say the goal seems unattainable.
The unattainable factor is heightened by these additional concerns:
Home Insurance Costs
Forty-three percent of respondents say rising home insurance costs may impact their ability to buy or keep a home with Gen Z (60%) and millennials (55%) feeling the most pressure.
Climate-Related Factors
Environmental deterrents such as water availability, storms, flooding, heatwaves, and wildfires will impact where 41% of respondents choose to live in the next five years. Of the group, Gen Z (58%) is more likely to note that climate-related risks will impact where they live followed by millennials at 53%.
Overall Cost of Living
Over half of respondents (60%) say their concerns about the cost of living have increased throughout the past three months. Thirty percent of respondents say housing costs are equally as worrisome as credit card debt (30%) and 81% say their overall financial situation causes financial anxiety.
"It's clear that Americans are feeling the strain of elevated rates, and many are uncertain about how to go about navigating the ever-evolving housing market," says Thomas Parrish, head of U.S. retail lending at BMO.
