Is homeownership possible for young Americans?

By Ava Moin

The American housing market is one that has seen immense change in the 21st century. It is often viewed as a pivotal marker of economic health in the US.

Young people all over the country are having doubts about whether or not they will ever be able to afford a home.

Millennials and Gen Z are two of the largest generations in history according to Statista. But the ability to buy a home while making a reasonable income as their parents and grandparents may have done seems to be just out of reach for this generation.

“I just don’t think it will ever be possible for me or my friends, we have to start looking for other alternatives,” said 20-year-old barista Emily Schroeder.

The issue seems to be that housing and rent prices have increased but income has not kept the same pace. According to US Census data, the median home price has increased 121% since 1960, but income has only increased 29%.

Buying a home is simply becoming unaffordable even within a fluctuating housing market. According to CNBC, buying a house in 1940 would cost $30,600 adjusted for inflation. Buying that same house in 2000 would cost $119,600 and buying that house today would put you back nearly $200,000.

College student Maya Nelson said, “Buying a house is the ultimate symbol of the American Dream. It doesn’t feel realistic that I could independently buy a house, but renting forever doesn’t seem realistic either.”

Pessimism seems to be the overarching attitude that young people have towards homeownership. What was once the next logical step in growing up is no longer accessible.

It is true that owning a home is a critical part of achieving the “American Dream”. It is a major way that most Americans build their wealth.

Denver has become the second most competitive housing market in 2022, only falling behind San Francisco. 70% of listings in metro Denver have sold for above the initial asking price according to a Denver Post report. 

In April the average home in Denver sold for $33,364 over the asking price. This extremely hot current housing market is certainly not encouraging young people to become first-time home buyers.

“Post pandemic, the housing market is more competitive than I’ve ever seen it,” said longtime Colorado realtor Kathleen Hawkins, “It is hard to get a house without making a cash offer.”

Hawkins got her real estate license in 1997 and has worked selling homes, leasing apartment complexes, and in commercial real estate during her career. The trials of the housing market are a constant stressor on homebuyers.

“Housing market competition can manifest in terms of external competition related to the “crowding out” by other buyers such as older homeowners, buy-to-let landlords, and holiday-rental providers” according to “The unequal geography of declining young adult homeownership: Divides across age, class, and space” an article written by the Institute of British Geographers.

Independent homeownership may seem unachievable to many young people, but maybe this unexpected fate may not be as bad as previously thought.

An article published in the Journal of Housing research entitled, “A Revision of the American Dream of Homeownership” states that in a strict “horse race” comparison, renting creates higher wealth accumulation than homeownership.

This is contrary to the casual argument that paying rent is a waste of money as you are only paying a landlord’s mortgage. It is true that owning a home gives you a lead in wealth accumulation but simply owning a home will not make you wealthy.

Interest rates for a 30-year fixed mortgage in Denver are currently almost 6%. Without reinvesting equity in your home, you are no better off than renting.

It may be necessary to re-examine the outline of the American Dream. Homeownership may not be the only path toward appropriate wealth management. 

Millennials and Gen Z prospective homebuyers may be able to look into alternatives and create a new path towards a steady home.

College students Maya Nelson and Emily Schroeder both spoke of alternative housing when asked about buying a home. It is obvious that young people are actively brainstorming ways in which they can live within their means.

Buying land and building one’s own home, buying a tiny home, or building an Earthship are all housing options that have gained popularity in recent years.

Taos, New Mexico Earthship owner Riley Hernandez said of her housing journey, “I wanted to build an Earthship to be as sustainable as possible. It is certainly cheaper than buying a house in a city but it is a lot of work to build.”

The experience of building one’s own home is something that Hernandez said everyone should make happen for themselves if they can. Buying a home is no longer a prerequisite to being successful in America.

College students who are already bogged down by student loan debt are wary of adding more debt to their portfolios by taking out a mortgage. The chances of being approved for a mortgage loan with student loan debt are also lower.

The Journal of Affordable Housing & Community Development Law also explains that millennials are making lifestyle choices that delay buying a home. Millennials are getting married and having children later than any other generation and often live with their parents much longer.

Homeownership may not be the norm amongst the young generation, but even if buying a house is someone’s end goal, there are always ways to get there.

“My friends and I have talked about pooling our money for a down payment on a house. I think that is the smartest thing we could do right now,” said Emily Schroeder. 

The housing market may not be as easily accessible as it was to baby boomers or generation x, but young people are getting creative about where they will put down roots. 

It may be difficult for many people to fathom independently becoming a homeowner but there are always ways to achieve one’s financial goals even without a home.

Whether it means abandoning traditional homeownership for cheaper alternatives or finding a creative way to achieve the American Dream, all is not lost for the upcoming generation in this daunting housing market.