Why young Americans aren’t relying on homes to build wealth

With unaffordability on the rise, younger Americans are less frequently turning to homebuying as a primary way to build wealth and create economic stability. Low starter-home inventory and high costs are among the main drivers, as millennials and Generation Z turn to alternative ways to build wealth. 

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Nine in 10 adults younger than 40 say it’s harder for young adults today to buy a home than it was for their parents’ generation, according to new data from the nonprofit Pew Research Center. The Pew survey also found that only one in four adults ages 18 to 39 think buying a home is a “very good investment,” while 38% think it’s “somewhat good” and 21% think it’s neither good nor bad. 

In comparison, nearly 40% of adults aged 60 and older said buying a home is a “very good investment.” That sentiment is reflected in purchases: At 42%, baby boomers remain the largest share of homebuyers so far this year, according to the National Association of Realtors. Americans age 55 and older also hold 75% of the nation’s wealth, according to the Federal Reserve.

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Low first-time buyer participation, low inventory

Millennials dropped to just 26% of homebuyers, down from 29% the previous year, and Gen Zers made up 4%, according to NAR. 

“First-time homebuyers have really struggled in today’s housing market due to affordability and also incredibly tight inventory, especially for starter level homes,” said Jessica Lautz, NAR’s deputy chief economist.

Smaller homes are in short supply, and most homes on the market are larger single family homes with three bedrooms and two baths, locking out many first-time buyers, Lautz said. 

Factors outside of the housing market including high rent, student loan debt and childcare costs have also prohibited younger Americans from saving for a down payment, Lautz said. 

The NAR estimates a typical homeowner this year will have $446,000 in net worth, Lautz said, but first-time homebuyers entering into the market are missing out on the wealth-building opportunity.

“When we’re looking at a home buyer who’s now 40, versus 30, we’re looking at that individual losing out on $150,000 of wealth gains that they may have had over that 10 year period from purchasing a starter home at a later age,” Lautz said. “This is going to likely continue unless there really is building of more starter homes that can bring in more home buyers.”

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Ownership feels out of reach

Only 18% of 18- to 34-year-olds think that owning a home is a good way to build wealth, according to a 2025 Ipsos survey. 

Many younger Americans have a moderate or pessimistic view of homeownership because the benchmark seems so unattainable to them, said Chris Porter, senior vice president of research at John Burns Research and Consulting. 

In June, the median U.S. home price rose to nearly $409,000, up 2.2% from last year, according to Redfin. The 30-year mortgage rate is hovering above 6.5% in July, further pricing out first-time homebuyers. 

Though that rate isn’t astronomical, the recency bias of the lower mortgage rates available during the early pandemic years has homeowners staying put, Porter said.

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“Some housing supply that might have been unleashed to the entry-level buyer under normal circumstances is being held back because existing householders aren’t willing to move and trade up to a higher rate,” Porter said. 

For some Gen Zers, neither homebuying nor wealth-building is a priority. A recent Intuit survey found that 64% of Gen Zers prioritize peace of mind over wealth. Underscoring the lack of movement into homeowning is Federal Reserve data that shows nearly half of young adults ages 18 to 29 live with their parents. Another 47% of adults in that same age range receive help from someone outside their household to pay expenses. 

“The fact that home prices are as high as they are, it’s going to be more challenging for them to make homeownership their main source of building wealth over the long run,” Porter said.

But high home prices don’t mean younger generations are locked out of wealth-building forever. Rather, the milestone is simply being delayed, much like other life transitions like marriage, a first job or financial independence, Porter said. And he doesn’t think that is a bad thing. 

“If someone’s buying a home at 32 instead of at 26, they’re still buying a home. It’s just happening later,” Porter said. “They might even be able to afford a different type of home by the time they’ve reached 32 because they’ve accumulated more wealth, or maybe have dual incomes at that point if they’ve gotten married.”

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Making alternative plans

When younger people do invest in homes, it’s rarely for the sole purpose of building wealth, Porter said. Instead, it’s to provide security and support for their families. 

Dinon Hughes, financial planner at New Hampshire-based Nvest Financial and a member of Gen Z, said most younger clients are investing their wealth in 401(k) plans and IRAs — a distinct shift from baby boomers, who primarily built their wealth through homebuying. 

But given today’s high home prices and interest rates, Hughes foresees retirement accounts continuing to be the primary wealth-building tool for young people. 

For both clients and peers in his circle who still want to enter the real estate market, Hughes said he sees people getting creative. He practiced this himself by purchasing a duplex, living in one half with his girlfriend, and renting out the other side to two friends.

“Generations before us saw homebuying as the American dream,” Hughes said. “Now we have access to investing in cryptocurrency and in online brokerage accounts, where you know you can trade anything you want on your phone in the palm of your hand. So when they say, ‘OK, I could buy a house, is that really an investment?’ It’s more of a life event.”