Here, we discovered that three-quarters of Americans prefer to own a home vs. rent, with two-thirds of those under the age of 35 expressing the same preference. Despite this preference, only around one-third of those under 35 own a home today, according to Pew.

So what is holding them back?

If you believe some public opinions, the youth’s obsession with food delivery, avocado toast, and high-cost Netflix subscriptions are to blame.

But in our survey, we decided to ask renters directly...

According to American Renters, financial constraints like limited income and student loan debt contribute to an inability to secure a mortgage large enough for the homes that are available for purchase. Not the relatively low-cost luxuries some may (condescendingly) cite.

To further test the veracity of these stated barriers, we compiled data from a variety of sources to examine the changes in home prices, wages, and college costs over time.

Here we found that wages and home prices actually rose at a similar rate from 1985 to 2000, but outside of the housing crash in 2008, have diverged significantly since. Meanwhile, college costs have been consistently outpacing wages and have increased +520% since 1985 compared to only half of that (+259%) for wages.

To demonstrate the profound impact this has with a more concrete example: in dollars unadjusted by inflation, the median home price has increased by over $200,000 since 2010 while median wages have only increased by ~$16,000 over the same period. This divergence is better demonstrated in dollar-terms (rather than percentages) and shows how much more difficult it is for the average consumer to afford a home today than in past years.

Combine this with the increase in college costs, nearly doubling since 2004, and you create both a moving target upward and a debt anchor downward keeping people from reaching what many equate with the American Dream, which over half see as essential to building wealth in our survey.

So what can be done?

While trimming the cost of an annual Netflix subscription ($200-250 per year) or a once-per week avocado toast habit (~$500 per year) won’t bridge the gap, recent initiatives by the Biden Administration offer some hope for Renters. With its Housing Supply Action Plan, the Federal Government is adding incentives for builders & local jurisdictions to nudge them in the direction of more affordable housing as well as introducing new financing options to help prospective buyers close financial gaps.

Coupled with limited student loan debt forgiveness and flirtations with broader forgiveness policy provides additional avenues that could increase Renters’ access to homeownership.

The Fed’s delicate dance with interest rates is a bit more complicated – avoid rate increases and inflation (consumers’ top concern) will continue to push home prices higher. Increase interest rates and the average mortgage becomes much more expensive, both near and long-term, and rents are likely to continue to rise. But with fewer seeking to buy a house following recent rate hikes, these increases may have another positive effect on home prices by reducing competition & bidding wars.

All in all, it remains to be seen what the net effect will be, but in the meantime, our advice is to save what you can, catch up on great content from your favorite streamer (password share if you must 😉) and don’t feel guilty about treating yourself to an occasional avocado toast if it makes you happy.

Chart Data Sources:

1. Median Home Prices: https://fred.stlouisfed.org

2. Median Wages: https://www.ssa.gov/oact/cola/central.html

3. College Costs (the average of Public & Private 4-year degrees was used for the chart): https://educationdata.org/average-cost-of-college-by-year