77% of home listings out of reach for middle-income earners, data show
The wealth gap between homeowners and renters has reached its widest level since the government began tracking it in 1989, according to a new analysis from the Urban Institute. According to researchers, the widening divide could make it harder for young adults to build wealth.
The Urban Institute’s analysis, based on Federal Reserve data, found that the net worth gap between owners and renters hit its widest point in 2022, the most recent year for which figures are available. Jung Hyun Choi, a researcher at the Urban Institute, told NPR she does not expect the gap to have narrowed since then, given that home prices have continued to climb and mortgage rates remain elevated.
Home prices have surged more than 50% in the last six years, according to the Harvard Joint Center for Housing Studies, reaching a national median of $440,600 — a record. The average 30-year fixed mortgage rate stood at 6.66% as of July 30, according to FRED data, adding to affordability strains for would-be buyers. A massive shortage of starter homes is driving up prices, and a Realtor.com analysis found 77% of home listings are out of reach for middle-income earners.
Mechele Dickerson, who researches housing and the middle class at the University of Texas at Austin, said, “For young adults who are middle class, they are facing a future of no wealth.”
Jay Washington, 38, of Athens, Ga., said he graduated during the Great Recession and has cycled through periods of unemployment or underemployment. He now works in IT, but told NPR that student loans and the high cost of rent and food have made it nearly impossible to save for a down payment. “I feel more like I’m just surviving,” Washington said.
Brittany Gilroy and her husband Phillip West, both 35, of Richmond, Va., have lived with a roommate for nearly four years while trying to buy a home. They have seen the prices of houses they’ve seen rise from the mid-$300,000s to more than half a million dollars. “I feel like we’re not the only ones living in this constant state of uncertainty,” Gilroy told NPR.
On the other side of the divide, Matt and Amanda Mracek of Orlando, Fla., benefited from timing. They bought their first homes in Minnesota after the 2008 housing crash, using low down payments and a federal tax credit. After building equity, they traded up and locked in a 2.6% mortgage rate in 2021 just before rates spiked. Choi said owners benefit from stable mortgage costs that allow them to save and invest more easily than renters, who face potential rent increases. “Housing wealth also transfers to future generations,” she said.
Tom Henriod, a Utah housing developer who has urged the state to make it easier to build affordable condos, wrote in a proposal to Utah officials that if the gap continues, it could foster “discord between classes and increased risk of societal unrest.” In an interview with NPR, he later said, “That might be going to a little bit of an extreme.”
The broader underemployment rate — which includes discouraged workers and involuntary part-time employees — stood at 7.9% in June, according to FRED data, highlighting the labor market challenges that make it difficult for many renters to build the savings needed for a down payment.