As many are priced out of buying, the renter-owner wealth gap is wider than ever : NPR

Record high housing costs have pushed the wealth gap between renters and owners wider than ever. It’s been a boon for owners even as many others are priced out.

SACHA PFEIFFER, HOST:

This summer, the median U.S. home price hit another record high – $444,000. That yearslong upward trend has widened the wealth gap between renters and owners more than ever. That’s been a boon for owners, but it’s pricing out many would-be buyers, as NPR’s Jennifer Ludden reports.

JENNIFER LUDDEN, BYLINE: Jay Washington is 38 and grew up in the house his mother bought in Augusta, Georgia. She had no college degree and used only her single income at a local manufacturing plant.

JAY WASHINGTON: The real estate agent told her in about, like, five years (laughter) you’re probably going to give me a call and, like, thank me for being able to get this house.

LUDDEN: And she did. Today, she’s still there, and the home’s value has grown to nearly $300,000. Washington lives a couple hours away in Athens and would love to own a home, not only for financial security.

WASHINGTON: It is really kind of a sign that you truly feel independent.

LUDDEN: But like so many millennials, he graduated college at the height of the great recession, with unemployment peaking at 10%. What’s more, his degree from a for-profit college – later sued for alleged deception – seemed worthless.

WASHINGTON: I basically was stuck in a cycle of, like, unemployment or underemployment.

LUDDEN: Washington eventually got another college degree and now has a good job in IT. But with student loans, plus the high cost of rent, food and so much else, it’s hard to save for a down payment. Meantime, home prices have surged more than 50% in just the last six years.

WASHINGTON: I feel like I’m just kind of, like, surviving. At this point, I’m not really sure if I’m going to be able to own a house.

MECHELE DICKERSON: Most middle-class families have most of their wealth in their homes.

LUDDEN: Mechele Dickerson researches housing and the middle class at the University of Texas at Austin. She worries about the long-term consequences as more people are shut out of ownership.

DICKERSON: For young adults who are middle class, they are facing a future of no wealth.

LUDDEN: To be clear, she says there’s nothing wrong with renting if you can still save for retirement. It might work better for some. But for generations, it’s been housing wealth that has helped many do better than their parents.

DICKERSON: We’re ending up in this space where if you’re OK, it may be because your parents were OK. And if your parents were struggling, you may be struggling, too.

(SOUNDBITE OF DOOR KNOCKING)

BRITTANY GILROY: Hi.

LUDDEN: Hi.

GILROY: This is Basil. He just…

LUDDEN: Hello.

GILROY: …Wants to sniff you.

LUDDEN: In Richmond, Virginia, Brittany Gilroy and her husband, Phillip West, rent this red brick, two-story home along with a roommate. Both are 35, and when they moved in with a friend, they thought it would be only for a few months until they bought a house. That was nearly four years ago.

GILROY: Pretty much every time, when we looked at a house, we went, ugh. We said no. And then the prices of the houses go up.

LUDDEN: Both of them have good-paying jobs, but the homes they see are either way above their price range or need repairs that would wipe them out. It’s all put on hold another major life decision.

PHILLIP WEST: It’s definitely part of our consideration for, do we have kids or not, you know (laughter)? And it’s a bit of a clock.

LUDDEN: Gilroy only wants children if they can buy a place and settle down – safe neighborhood, good schools. But with prices so high, they worry about taking on all that debt.

GILROY: I feel like we’re not the only ones living in this constant state of uncertainty, and if you want to make a dive into buying a house, you’re going into the deep end. There is no kiddie pool of a starter home.

LUDDEN: In fact, there is a massive housing shortage, especially of starter homes, and it’s driving prices up. Last year, a housing developer in Utah urged the state to make it easier to build affordable condos. And in that letter, he warned about the widening wealth gap between owners and renters. Tom Henriod of Rockworth Companies wrote that it could foster, quote, “discord between classes and increased risk of societal unrest.”

TOM HENRIOD: That might be going to a little bit of an extreme, but if there’s a feeling that there’s a few haves and a bunch of have-nots, I think all of us can see some of the problems that come with that.

LUDDEN: He also has four children and says young people need hope that they can make it on their own.

HENRIOD: You see how much a house might cost that you might want to live in, and you look at your income coming out of college or something like that, it might feel overwhelming, depressing, you know, difficult and that’s certainly an effect, for sure.

LUDDEN: Congress recently weighed in with a law that aims to eventually expand the supply of homes. And prices in some places are cooling off. For now, though, of the many factors dividing housing haves and have-nots, a big one is timing.

MATT MRACEK: It was my fourth year in college, and there was a foreclosed home.

LUDDEN: Matt Mracek bought his first house with a friend back in 2010 using a federal tax credit created in the wake of the housing crash. They added bedrooms in the basement and rented them out. Soon after, his girlfriend – now wife – Amanda, bought a small fixer-upper with just $5,000 down.

AMANDA: Very, very dated. There was carpet in the bathroom, puke-green sink with a puke-green matching oven.

LUDDEN: Family members pitched in to spruce it up. A few years later, they were shocked that the value had risen by $50,000. They traded up, then, after even more housing equity, traded up again when they and their three children moved to Orlando, Florida. That was in 2021, when they locked in a mortgage rate of 2.6% just before rates spiked – so lucky.

AMANDA: A hundred percent – it was probably the bottom rate that we could have gotten along the way.

LUDDEN: Their younger siblings back in Minnesota are facing a very different market. Still, Matt’s brother managed to buy outside the city where he works, and Amanda is encouraging her 22-year-old brother to sacrifice – rice and beans it – so he can buy something – anything – soon. A stepping stone now, she says, will make all the difference later.

Jennifer Ludden, NPR News.

(SOUNDBITE OF NICOLE WRAY SONG, “HOLD ON”)

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