Homeownership is more important — and less accessible — than ever

When your pipe breaks, who do you call: a plumber, or a landlord? How younger Americans answer that question may be key to their financial fortunes.

Perhaps more than any generation up to this point, young Americans’ ability to build wealth may uniquely hinge on whether they can afford to own property. Their wages, while no doubt affording them a higher standard of living than other generations, still haven’t risen as quickly as inflation and the cost of living. And surging demand for housing has sent prices soaring to the degree that a home now represents one of the most valuable assets the non-wealthy can possess.

“If you sort Americans by wealth, and forget about the top 10% or 20%, most of our wealth is indeed in housing,” Albert Saiz, faculty director of the Urban Economics Lab at MIT, told Salon. 

Since 2000, Americans’ median household income “barely rose over the whole time period,” according to a report from the U.S. Treasury. Wages for the lowest 90% of earners have risen by 15% since 2000, according to the Economic Policy Institute, while hourly wages have risen around 22% over that period. 

Meanwhile, housing prices have risen so much over the past two decades — around 65%, per the Treasury — that those who were able to buy a home around the 2000s were made “relatively wealthy,” Saiz said. “But people who are coming into the economy don't have that wealth, and they have to save harder and work harder to get there,” he said.

You can see the stark impact of new homeownership on a demographic’s financial standing in a series of studies, published by the Federal Reserve Bank of St. Louis, that tracked how millennials’ wealth — cash and assets, minus any debt — compares to previous generations. The first study, published in 2016, found that millennials’ median wealth was around 38% less than expected, based on past generations at their age. Things got a bit better in 2019, when millennials’ wealth was around 9% lower than the norm for adults their age. But 2022 brought a stratospheric shift, with millennials suddenly possessing a median wealth 37% above expectations — a 46-point upswing.

So, what happened between 2019 and 2022? A lot of them became homeowners. In the three years leading up to 2022, the share of millennial homeowners skyrocketed, by roughly 9%. That’s a pretty dramatic leap for that time period — typically, homeownership rates change incrementally, rising or falling one or two percentage points a year. You’d normally wait around a decade or longer to watch them hike up 10 points.

But U.S. homeownership rates are “subject to volatility during major economic events,” as Bankrate notes. As many readers will remember, the coronavirus pandemic’s stay-at-home orders created a massive surge of housing demand from homebuyers of all kinds: city dwellers wanting more for less in their hometowns, apartment dwellers itching for a yard, young families suddenly feeling cramped in their first homes. This created a white-hot housing market — and one in which the highest-earning millennials were able to afford a piece of the pie.

This appears to have created a generation of haves and have nots, based largely but not exclusively on whether one can afford to buy, rather than rent. Millennials face the steepest wealth gap of any other demographic, according to a study from the University of Chicago, with the poorest millennials having less money than the poorest baby boomers and the richest millennials possessing more wealth than the richest boomers. 

That wealth gap is partly due to unequal wage growth in recent years. The top 1% of earners have seen their wages grow by 138% since 2000, while the lowest wages haven’t grown meaningfully over that period. And top millennial earners have seen their earnings increase far more dramatically than high-earning boomers’ wages grew during their prime working years. “Housing actually exacerbates a problem that would already be bad enough if it was only driven by the way in which the income distribution has become more unequal,” Saiz told Salon. 

Still, the gains in real estate value “drove most of the overall growth” in millennials’ median wealth gains in 2022, the Federal Reserve noted. And this suggests that the value of homes acquired during that period was significant enough to sway millennials’ overall economic standing against other generations at their age — even if a minority of millennials bought homes during that period. Millennial homeownership rates still lag behind other generations, with fewer millennials owning homes compared to boomers at their age.  

“This has been an issue for decades, and it's gotten worse, I suppose, because prices have been increasing,” Alex Schwartz, a professor of urban policy at The New School, told Salon. “But it's not like there was a halcyon time where home ownership was readily available for renters.” 

That also, of course, means homes have become increasingly unaffordable for the average American. Half of U.S. adults couldn’t afford to buy a $250,000 home, a National Association of Home Builders study found in 2024 — a particularly stunning figure when you learn that the average home sale last year exceeded $500,000.

So, what does this mean for younger Americans? Frankly, that something has to give, whether in workers’ wage growth or in making it easier for Americans to become homeowners. National policy hasn’t been too focused on boosting the number of young homeowners, save for then-presidential candidate Kamala Harris’ proposal to offer up to $25,000 in down payment assistance for first-time homebuyers last fall. 

Schwartz noted that critics of the proposal feared it would just inflate housing prices, but he disagrees with that take: “I actually think that would have helped, because having the resources for a down payment is a huge barrier,” he told Salon. 

Saiz also acknowledged the unique challenges of becoming a first-time homebuyer, especially considering that the average American has around $8,000 in liquid cash savings, compared to the median down payment currently standing at more than $60,000. “Obviously, getting that first home is the hardest of the steps,” Saiz said. “Because once you have a house, you can build collateral, and that equity is going to be helpful for you to buy a second home.”

This also points to the need for relief for renters, like national rent control, which the Biden administration urged Congress to pass legislation on last year. One-bedroom apartment rents rose around 2.9% last year, according to Zumper, an apartment rent tracking website, while two-bedrooms’ rent rose 3.7% annually.