Jay Washington, 38, stands for a portrait at his residence in Athens, Ga., earlier this month. Washington would like to own a home, but after a cycle of underemployment, he’s not sure whether he’ll ever be able to.
Alyssa Pointer for NPR
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Alyssa Pointer for NPR
Jay Washington grew up in the house his mother bought in 1984 in Augusta, Ga., with no college degree and only her single income at a local manufacturing plant. He said her real estate agent had a prediction when she got the keys.
“‘In about, like, five years, you’re probably going to give me a call and thank me for being able to get this house,'” Washington said.
Indeed, she did just that. Today, she’s still in the home, whose value has steadily grown to nearly $300,000.
Washington, 38, lives a couple hours away in Athens and would love to own a home – both for the financial security and because he sees it as “a sign that you truly feel independent.”
But he’s part of a generation that now faces a vastly different housing market than their parents did – and experts worry that could make it harder for young people to build wealth as they age. This summer, home prices hit another record high of $440,600. Those equity gains have been a boon for owners, even as they leave many priced out of buying and fuel a generational divide.
The housing crunch also comes after so many Millennials were hit hard by the Great Recession. Washington graduated from college in 2009, the same year unemployment peaked at 10%. On top of that, his degree from a for-profit college – which was later sued over alleged deception – seemed worthless.
“I basically was stuck in a cycle of unemployment, or underemployment,” he said.
Washington went back to earn an associate’s degree, then a second bachelor’s degree and now has a good job in IT. He’s doing okay. But with student loans looming, plus the high cost of rent, food and so much else, it’s hard to save for a down payment. Meanwhile, home prices have surged more than 50% in just the last six years, according to the Harvard Joint Center for Housing Studies.
“I feel more like I’m just surviving,” he said. “At this point, I’m not really sure if I’m going to be able to own a house.”
“A future of no wealth”
As more people face the prospect of renting forever, there’s concern about the long-term consequences.
“Most middle class families have most of their wealth in their homes,” said Mechele Dickerson, who researches housing and the middle class at the University of Texas at Austin. “For young adults who are middle class, they are facing a future of no wealth.”
To be clear, Dickerson sees nothing wrong with renting if people can still save for retirement; it’s more flexible and less hassle. But for generations, especially for the middle class, housing wealth has been key in helping many do better than their parents.
“What’s disconcerting for me is we’re ending up in this space where if you’re okay, it may be because your parents were okay,” she said. “And if your parents were struggling, you may be struggling, too.”
A massive housing shortage, especially of smaller starter homes, is driving prices up. A recent analysis from Realtor.com found 77% of home listings are out of reach for middle-income earners. Rents have also risen faster than incomes, leaving nearly half of renters cost-burdened, meaning they pay more than a third of their income for housing.
That budget strain for renters, combined with escalating home equity for owners, has pushed the wealth gap between the two groups to its highest level since data was first collected in 1989, according to analysis from the Urban Institute, which focuses on upward mobility.
The latest data is from 2022, and the Federal Reserve’s board of governors will release an updated version of the triennial survey later this year. But Jung Hyun Choi, a researcher at the Urban Institute, does not expect the gap to change much, given that home prices nationally have continued to climb and mortgage rates remain elevated.
The analysis of the wealth gap includes both housing and other wealth, which can affect each other.
For example, a fixed-rate mortgage means “pretty stable housing costs over a longer period,” Choi said, allowing owners to more easily save and invest in financial markets. That’s harder to do for renters who face potential rent hikes, she said, meaning that many missed out on enormous gains in the stock market over the past decade.
“Housing wealth also transfers to future generations,” she said, so this wider inequality will likely play out in families for decades to come.
Married, mid-30’s, and renting with a roommate
Brittany Gilroy and her husband Phillip West, both 35, rent a red brick two-story home in Richmond, Va., with their dog, Basil, and another roommate. They moved in with their friend thinking it would only be for a few months, until they bought a house. That was nearly four years ago.
“Pretty much every time when we looked at a house we’re like, oh, do we want to be zeroed out or not,” Gilroy said as they sat on the living room couch. “And we said no. And then the prices of the houses go up.”
Brittany Gilroy and her husband Phillip West live with their dog and a roommate in Richmond, Va. They’re trying to buy a home but finding it out of reach, for now.
Jennifer Ludden/NPR
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Jennifer Ludden/NPR
Student loan debt delayed their search, but both now have well-paying jobs and have saved toward a down payment. Yet the homes they’ve seen are either above their price range or need repairs that would wipe them out.
In fact, they’ve been shocked at how quickly prices have gone up. Places listed in the mid-300s when they started looking are now valued at half a million dollars and more. They watched an investor buy a house across the street, expand it, and sell it for much more than that.
It’s all put another life decision on hold.
“It’s definitely part of our consideration for, do we have kids or not, you know? And it’s a bit of a clock,” West said.
Gilroy only wants children if they can buy a place and settle down in a safe neighborhood with good schools. That, of course, raises the cost. And with prices so high, they worry about taking on all that debt.
“I feel like we’re not the only ones living in this constant state of uncertainty,” Gilroy said. “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.”
A few haves and “a bunch of have nots”
Last year, Utah housing developer Tom Henriod urged the state to make it easier to build affordable condos. He was watching a boom in new multifamily housing, but it wasn’t helping people get a foot in the market because “really all of it was for rent,” he said.
In his proposal, he warned about the widening wealth gap between owners and renters and suggested it could foster “discord between classes and increased risk of societal unrest.”
“That might be going to a little bit of an extreme,” he told NPR recently. “But if there’s a feeling that there’s few haves and, you know, a bunch of have nots, I think all of us can see some of the problems that come with that.”
Henriod sees homeownership as a public good. He also has four children, and said young people need hope that they can make it on their own.
“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,” he said. “It might feel overwhelming, depressing, you know, difficult. That’s certainly an effect, for sure.”
A small but growing number of Gen Zers in their 20s are managing to buy homes despite the odds, most without parental help. Home and rent prices in some places are cooling off or even dropping. And to tackle the broader problem of supply, Congress recently passed a law that aims to make it easier to build housing.
But it will be up to states and localities to follow through, and President Trump has long echoed the fear of many owners that increasing density could hurt existing home values. “I don’t want to drive housing prices down,” he said during a January cabinet meeting. “People that own their homes, we’re gonna keep them wealthy.”
How much housing wealth is enough, though? Dickerson, the University of Texas researcher, said that’s “one of the conversations we’re going to have to have as a society … If your house has already appreciated by 50% from the time you bought it, do you really need it to soar to 100% or 400%?”
A “puke green sink” and sweat equity
There are many factors dividing housing haves and have-nots – but a big one is simple timing.
Matt and Amanda Mracek live with their three children in a lakefront home outside Orlando, Fla. Their path there goes all the way back to their college days in Minnesota in the wake of the 2008 housing crash, when home values plummeted.
“It was my fourth year in college and there was a foreclosed home,” Matt explained. He and a friend used a federal tax credit to buy the house and added two more bedrooms in the basement to rent out.
Matt and Amanda Mracek, who now live with their three children outside Orlando, Fla., each bought a first house in Minnesota after the 2008 housing crash.
Nikki Malambri
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Nikki Malambri
Then Amanda bought a 900-square-foot fixer-upper for a bit over $100,000 with just $5,000 down. “Very, very dated,” she recalled. “There was carpet in the bathroom … puke green sink with a puke green matching oven.”
Family members pitched in to spruce it up. A few years later, the couple was shocked when their realtor told them the home’s value had risen by $50,000. They traded up, then after gaining even more housing equity, traded up again when they moved to Orlando.
That was in 2021, and they locked in a mortgage rate of 2.6% just before rates spiked. “It was probably the bottom rate that we could have gotten along the way,” Amanda said.
They have younger siblings back in Minnesota and know today’s market is very different. Still, Matt’s brother managed to buy looking 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 said, will make all the difference later.
