1 in 4 potential buyers waiting for rates to fall — below 3% 

The spring homebuying season hasn't picked up much steam this year, and some economic forecasters are predicting the market will remain slow through the end of 2025. Although mortgage rates have stabilized in recent weeks, they are still too high for many potential buyers, and younger aspiring homeowners are feeling especially squeezed by steep home prices, a new report from BMO Economics suggests.

While most Americans aspire to own a home, many feel that homeownership is out of reach. But even amid affordability challenges and general economic concerns, all hope is not lost, according to Scott Anderson, BMO's chief U.S. economist.

"The good news is economic and financial conditions can change quickly, so it makes sense to start planning today," Anderson said in a press release. "With the right conditions and early planning, younger Americans will still likely be able to attain their goal of homeownership." 

Waiting for a 'just right' rate

Of the 2,500 U.S. adults surveyed for BMO's report, 67% said mortgage rates are affecting their buying decisions. The share is even greater among millennials and Gen Zers (69%) as they wait for a rate that feels "just right," according to BMO's release.

So what exactly is that ideal rate? Nearly 1 in 4 respondents said mortgage rates need to drop below 3% before they'll consider purchasing or refinancing a home — a scenario economists see as highly unlikely. 

Another 15% want rates to be around 3%, and 12% said they will consider making a purchase when rates near 4%. In his 2025 forecast, NAR Chief Economist Lawrence Yun said even that threshold was unrealistic: "Are we going to go back to 4% mortgage rates? Well, my forecast, unfortunately, is no," he said in November, adding, "I think the new normal will be a 6% mortgage rate."

While younger buyers may be more influenced by mortgage rates, older buyers are more likely to hold out for ultra-low rates. Only 9% of Gen Zers are waiting for rates to fall below 3%, compared with 18% of millennials, 25% of Gen Xers and 35% of baby boomers.

Waning hopes for homeownership?

Buying a home is still a key part of the American Dream for some, but many are finding the path to homeownership tougher to navigate. According to the report, 61% of adults are less confident in their ability to own a home than they were five years ago, and nearly half (49%) believe they "missed my moment to buy a home."

Renting was preferable for many nonowners: 57% said they're content to continue renting, and 53% felt no need to buy because renting is more flexible.

Although more Gen Zers ranked home prices as a barrier to ownership than other generations, they are also the most interested in buying a home, with the report noting that younger potential buyers "are less content with renting than other generations."

Views on a first-home purchase as a stepping stone to something bigger and better also appear to be shifting. While 60% of respondents are open to buying a fixer-upper, 58% said it "makes no sense" nowadays to invest in a starter home and upgrade later — a perspective shared fairly evenly among all generations surveyed.

Sales could rise in 2026 and beyond

While more than half of the survey respondents (56%) said they have no plans to buy a home in the "near future" — and just 17% expect to buy this year — the next few years could see an uptick in sales, as 27% of potential buyers plan to buy a home in 2026 or later.

Aspiring homeowners tended to be younger, with more than half of Gen Z (59%) and millennial (53%) respondents indicating they want to buy in the near future, compared with 35% of Gen Xers and only 13% of baby boomers.