Homeownership has long been a major part of the "American Dream," but how ready are Americans for this significant financial milestone? Our most recent study points to some big gaps between aspiration and reality.
From financial hurdles to unknown terms, we'll reveal the challenges homeowners, prospective buyers, and renters face across generations and provide a look at the state of homeownership literacy in America today.
Key Takeaways
- 76% of homeowners lacked homeownership literacy until after buying their home.
- 1 in 3 homeowners doesn't know their mortgage interest rate, and 22% are unsure of their monthly mortgage payment.
- Over 1 in 4 homeowners (27%) were surprised by unexpected fees during the homebuying process.
- 1 in 5 prospective homebuyers have delayed purchasing a home due to confusion around financial literacy.
- 1 in 8 prospective homebuyers can't accurately define "mortgage," and 43% are unsure about the meaning of "mortgage rate."
- 1 in 4 Gen Z renters get their homebuying knowledge from TikTok.
Homeownership Challenges
We found significant knowledge gaps among people who have achieved the milestone of homeownership. Many also faced unexpected challenges and financial surprises after purchasing their homes.
For many Americans, it's a hard time to buy a home in the current housing market. Over half of the homeowners we surveyed reflected this: 60% reported they wouldn't be able to afford their home at today's market prices. But homeownership is hard, too — and most homeowners bought their property without fully understanding of what it would entail. Over three-quarters (76%) lacked homeownership literacy until after buying their home, with millennial homeowners being the most likely (80%) to have had this knowledge gap.
Homeownership literacy includes things like ongoing costs beyond the mortgage (such as property taxes, homeowners insurance, and maintenance), different mortgage types, and the responsibilities that come with property ownership (like routine maintenance and potential HOA obligations).
Over one-quarter (27%) of homeowners were surprised by unexpected fees during the homebuying process. Another one-third said they didn't know their current mortgage interest rate, and 22% were unsure of their monthly mortgage payment.
These knowledge gaps extended to other financial aspects of homeownership as well: 40% of homeowners were not using an escrow account to pay their property taxes, potentially exposing themselves to large annual tax bills. Another 36% didn't have an emergency fund for unexpected home repairs, leaving them vulnerable to potential financial strain.
Are Buyers Financially Prepared?
Next, we uncovered common barriers that many prospective buyers encounter, from budgeting concerns to uncertainties about fundamental real estate concepts.
The financial aspects of home buying have presented significant hurdles for many prospective homeowners. Only one-third said they've budgeted for all the homebuying costs they'll need to pay for. Market concerns compounded this issue, with 69% of prospective homebuyers fearing they would be priced out of the market due to rising home costs. In response to current economic conditions, 61% of potential buyers said they're adopting a "wait-and-see" approach, holding off on purchases until interest rates drop.
Many prospective homebuyers have also struggled with understanding basic real estate terminology: 1 in 8 couldn't define "mortgage," a fundamental homebuying concept to understand. This knowledge gap was the most pronounced among younger generations, with 18% of Gen Z prospective homebuyers unable to accurately define the term. Another 43% of all prospective buyers were unsure of what a "mortgage rate" is. Financial literacy gaps like these have led 1 in 5 prospective homebuyers to delay their home purchase.
Renters' Path to Homeownership
Finally, we explored how renters across different generations view their journey toward homeownership, revealing each age group's distinct priorities and challenges.
Renters across generations identified the milestones they felt they needed to achieve before taking the leap into homeownership. Over two-thirds of Gen Z renters (the youngest potential homebuyers — 67%) said they needed to achieve a certain salary level before considering homeownership. Another 65% said they must have saved for a down payment. A quarter of Gen Z renters also got their homebuying knowledge from TikTok.
Most millennial renters (75%) placed the highest emphasis on saving for a down payment as their primary milestone. Another 54% said they needed to reach a separate savings goal before feeling ready to buy a home.
Gen X renters showed similar priorities to millennials, with 70% focusing on saving for a down payment. However, they diverged on their secondary focus, with 51% citing the need to improve their credit score before pursuing homeownership.
Insights Into Homeownership Literacy
From homeowners surprised by unexpected costs to renters navigating a path filled with financial milestones, it's clear that improved education and resources could help foster Americans' homeownership success. As the housing market continues to change, so must our approach to homeownership literacy. By addressing these knowledge gaps and providing targeted support for each generation's unique challenges, we can help turn the American Dream of homeownership into a more attainable reality.
Methodology
We surveyed 1,003 homeowners, prospective homebuyers, and renters to explore their homeownership literacy. Among them, 40% were homeowners, 30% were homebuyers, and 30% were renters. Their generational breakdown was as follows:
- Gen Z: 11%
- Millennials: 51%
- Gen X: 30%
- Baby boomers: 8%
The data was collected in October 2024.
About JW Surety Bonds
JW Surety Bonds is a leading provider of surety bond solutions for businesses and individuals across industries, including real estate and property management. We offer essential real estate bonds and insurance, promoting ethical practices and compliance with state regulations in the housing market.
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