The cramped two-bedroom apartment of the Petersen family in Northern California is becoming increasingly congested. Their 1,100-square-foot living space in Campbell, a suburb near San Jose, is filled with the four-year-old Jerrik’s toy monster trucks. As 9-month-old Carolynn grows, her collection of toys will also contribute to the chaos, according to their mother, Jenn Petersen.
Jenn, a 42-year-old chiropractor, had envisioned that she and her husband Steve, a 39-year-old dental hygienist, would have moved into a house by now. However, when they find the means to secure a larger residence, it will likely still be a rental. After crunching the numbers, Petersen recognized that with mortgage rates and home prices remaining high, the couple— who earn about $270,000 annually and currently pay around $2,500 in monthly rent—cannot afford to buy a house in their region.
Recent statistics from the Federal Reserve Bank of Atlanta indicate that a typical family’s income in San Jose, which is around $156,700, would require an overwhelming 80% of their earnings for housing costs. This includes an exorbitant $8,600 monthly mortgage payment to own a median-priced home valued at approximately $1.54 million. This financial strain starkly contrasts with the widely suggested guideline that housing expenses should take up no more than 30% of one’s income.
Relocating to a different state isn’t a feasible solution for the Petersens due to their firm family connections in the area, and they are aware that their income would significantly decrease if they moved to a less expensive region. “I’m not willing to give up my job and close relationships with my family for a house,” stated Petersen. This housing dilemma resonates on a broader scale, with the average American homeowner allocating 42% of their income towards homeownership costs, as reported by the Atlanta Fed. Four years prior, this rate stood at 28%, and it hadn’t surpassed 38% since late 2007, just before the housing market collapse.
“The American dream as our parents knew it is fading away,” Petersens mentioned. “The concept of buying a house after college, landing a stable job, and starting a family? I’ve accomplished many of those milestones, but the homeownership part? It’s just unrealistic financially.”
This sentiment is increasingly shared among American families, with the median age for first-time homebuyers reaching 38 in 2024, up from 35 the previous year, based on insights from the National Association of Realtors. Notably, this median age was between 30 and 32 from 1993 to 2018, indicating a significant cultural shift.
Experts highlight a primary cause for this shift: there simply aren’t enough homes available to satisfy the pent-up demand, resulting in inflated prices that are unaffordable to many early-career professionals. In tandem with heightened mortgage rates, many individuals feel that renting has become their only viable option. “Wage increases have not kept pace with rising home prices and interest rates,” noted Domonic Purviance, a housing analyst with the Atlanta Fed. “Although incomes are rising, the speed at which home prices are accumulating is outstripping it.”
This widening gap has excluded many from the housing market—historically a key means for Americans to cultivate equity and wealth that could later be leveraged for larger home purchases. Alarmingly, a recent survey revealed that about 70% of voters under 45 expressed significant concern about housing costs within their communities.
The idea of homeownership may be dwindling. Brian McCabe, a sociology professor at Georgetown University, points out that “though few things unite Americans, a shared preference for homeownership stands out.” He acknowledges that owning a home serves as an effective wealth-building strategy, particularly for those planning to stay in one location long-term. Conversely, he also recognizes that many people are starting to appreciate the benefits of renting, which can afford greater freedom for relocation and access to appealing neighborhoods that may be otherwise out of reach.
Changes in lifestyle are evident, as millennials are entering marriage and parenthood later and prioritize living in urban settings, a shift enhanced by remote work options. McCabe posits that this evolving mentality could signify a shift away from the traditional idea of homeownership being the ultimate goal of the American dream.
Petersen grapples with this notion, recognizing that any three-bedroom home suitable for her family in their vicinity would leave them financially strapped. “I once believed that homeownership was a crucial milestone to achieve,” she reflected. “But at what expense? I want to ensure that I can travel with my children and enroll them in extracurricular activities. How can I manage that if our mortgage takes up the bulk of our take-home salary?”
While Petersen clings to a glimmer of hope for future homeownership, she acknowledges the possibility of settling for a townhouse that accommodates her family needs within their monthly rental budget of $3,600. “If we can find that, I’d gladly accept it,” she concluded.
In some cities, efforts are being made to assist potential homeowners. Julieta Lopez, a lifelong resident of Boston, had long aspired to buy her own home but felt increasingly priced out of the market. “The prices in Boston just continued to soar,” remarked Lopez, who currently works for the city’s traffic department managing parking violations.
When her subsidized apartment’s rent was raised to $2,900 two years ago, the 63-year-old began searching for programs supporting first-time homebuyers. Within just a few months, she successfully qualified for $50,000 in assistance from both the Massachusetts Affordable Homeownership Alliance and the city of Boston’s Office of Housing to use as a down payment on a $430,000 two-bedroom condo that she shares with her 30-year-old son. Her monthly mortgage now stands at approximately $2,160.
Lopez acknowledges how fortunate she is, given that Boston has invested significant resources into supporting new homeowners. Since Mayor Michelle Wu took office in 2021, Boston has allocated over $24 million towards homeownership aid programs, aiding nearly 700 individuals in purchasing their first property.
Fulfilling her dream of homeownership fills Lopez with pride, considering her many years of hard work across various sectors, from telecommunications to healthcare to electronics. “I was determined to claim my piece of the pie,” Lopez shared. “I’ve always put in the effort, tirelessly and continuously.”
