In the United States, the classic American Dream includes the promise that owning a home means increasing wealth over time.
The idea is simple: home values typically rise, outpacing inflation.
Historically, this has been true, and it’s reflected in the data. Even when adjusted for inflation, home prices have generally gone up, albeit with some fluctuations.
The Financial Balancing Act
Owning a home in the U.S. isn’t just about having a roof over your head; it’s a significant financial asset.
The story often goes like this: you save a significant amount of money for a down payment, borrow the rest, and then pay back that loan over time. Unlike renting, owning a home provides stability and peace of mind.
Your home can even serve as collateral for other financial needs, like starting a business or paying for your children’s education.
For many middle-class Americans, their home is their most valuable asset, and it’s seen as a key to financial stability and wealth-building.

The Growing Barriers to Homeownership
But in recent years, buying a home has become increasingly difficult. Let’s dive into the numbers. Over the past 50 years, the median home price has risen significantly faster than median incomes.
In 1972, a household earning the median income could buy a median-priced home for about three times their annual income.
Fast forward to 2022, and that ratio has doubled; now, a median-priced home costs more than six times the median household income.
Supply and Demand: The Core Issue
Part of the issue is a lack of available homes.
The homeowner vacancy rate, or the percentage of homes that are actually for sale, is at its lowest point since data collection began.
Restrictive zoning laws across the country contribute to this shortage by limiting where and how many homes can be built.
This scarcity drives up prices, especially for lower-cost homes, which have become a smaller and smaller share of the market.
Interest Rates: A Double-Edged Sword
Interest rates also play a crucial role. Historically, mortgage interest rates have generally decreased, making monthly payments more affordable. However, the recent past tells a different story.
During the pandemic, home prices surged as many people sought to move.
Simultaneously, efforts to curb inflation in 2022 led to a spike in interest rates. This combination of high home prices and high interest rates makes buying a home even more challenging.
Moreover, current homeowners with low mortgage rates are less likely to sell, further reducing the supply of homes on the market.
The Impact on Minorities
These barriers are even more pronounced for people of color, who face higher denial rates for mortgage loans, regardless of their income levels.
This exacerbates the challenge of achieving homeownership and the associated financial stability.
Rethinking Financial Stability
Given these challenges, many young people in the U.S. feel discouraged by the housing market.
But is owning a home the only path to financial stability? Not necessarily. While homeownership has its benefits, other investment options can also provide financial growth.
The stock market, for example, has its ups and downs but generally trends upward over the long term. Similarly, government bonds and mutual funds offer stable returns with less risk.
The Takeaway
The conditions for buying a home change over time, and while recent conditions have been tough, they may improve.
In the meantime, renters can still find financial stability through other investments.
A home is a significant purchase and can be a good long-term investment, but it’s not the only option for building wealth.
In the end, it’s essential to remember that financial stability and growth can be achieved in various ways, and adapting to the changing economic landscape is key.
Whether you own or rent, smart financial planning and diverse investments can help you secure your financial future.