What happens if you never buy a house? What renters are gaining — and giving up.

When Tanisha Saunders graduated from college eight years ago, she felt optimistic that she was on her way to achieving an American dream that included homeownership.

She took some steps toward that goal, including researching programs that help first-time home buyers. But in recent years, Saunders, 36, says she has “freed” herself from the idea of becoming a homeowner.

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“The price of homes is so expensive and I just don’t see it as a part of my reality,” she said. And it’s not just the expense she’s concerned about.

Traditionally, homeownership has been associated with stability. But with insurance premiums and property taxes rising, the prospect of unpredictable maintenance costs and the risk of climate change affecting properties in Los Angeles, where Saunders lives, owning a house seems risky, she said. A sense of assurance is crucial to her, in part because she has experienced homelessness and housing insecurity.

For now, Saunders is living in a two-bedroom apartment that’s paid for by her employer as part of the compensation for her job as a property manager. That has helped her avoid the stress of elevated rents, but she still feels pressured by rising costs for groceries, gas and other essentials. Saunders said she and her friends lament how challenging it has become for them to buy a home when compared to their parents or even their older siblings.

“It actually feels like insanity to think about homeownership in the state of where we are as a nation and the unaffordability of basic goods,” she said. “The landscape has changed.”

Saunders is not wrong to feel like it’s a historically difficult time to buy a house. The median U.S. home price now hovers around five times the median income; historically, that ratio has been closer to 3 to 1. The share of 30-somethings who own their homes has dropped more than 5 percentage points in the past 20 years.

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These trends collide with longstanding financial advice for 20- and 30-somethings: Sock away funds for a down payment and buy a house, both as a place to live and as your main source of wealth.

With homeownership increasingly out of reach, what does that mean for the long-term finances of people who are renting indefinitely or living with family because they’re locked out of this traditional wealth-building tool?

What missing out on homeownership can mean for building wealth

Naomi Mortensen has always had it in her head that she wants to own a home. But so far — between rent, student loans, utility bills, groceries and saving for emergencies — she and her partner haven’t been able to put enough money away for a down payment.

Mortensen, 30, and her partner are part of a generation of 20-, 30- and even 40-somethings who increasingly view homeownership as unattainable. The factors fueling their challenges in affording a home are complex and stretch back decades, according to experts. Following the housing crash and the 2007-09 recession, developers pulled back from building, squeezing the supply of homes. In addition, lenders tightened credit standards, making it more difficult in many cases for younger buyers to qualify for a mortgage.

A decade later, during the pandemic, home prices skyrocketed, and in the years since, interest rates have risen as well. In a typical cycle, rising rates would push prices down, but they haven’t yet dropped significantly. The combination of high home prices and elevated interest rates has put would-be home buyers in a bind. Roughly 29% of 18- to 34-year-olds say they plan to buy a home in the next five years, according to Gallup. That’s down from 57% in 2015.

“Historically, it’s the best way for middle-income Americans to build wealth,” Mark Zandi, chief economist at Moody’s Analytics, said of homeownership. “It’s just not the case at the moment.”

Meanwhile, young adults are paying high rents, making it difficult to save for a down payment.

“Renting forever doesn’t invoke a lot of confidence in our future finances,” Mortensen said. “It does cause anxiety.” Even as the housing market has cooled in recent months in the Washington, D.C., area — where the couple wants to stay to be close to their jobs — the median list price is about $565,000. Right now, that’s out of reach for Mortensen and her partner, who both work at nonprofits.

Still, Mortensen sometimes wonders if she and her partner would feel comfortable buying a home even if they did have the money. Watching prices and interest rates climb so dramatically in recent years has her worried about future volatility in the housing market, which could put any investment in a home at risk. In addition, owning a home would lock up their money for the long term, making it difficult for them to move for work or to care for aging family members.

“Is it even a safe time to put so much stock in such a long-term asset that, yes, may appreciate — but who knows if we’ll reach that time where it may appreciate?” she said.

In the U.S., homeownership has historically been one of the most accessible paths for generating wealth — but it’s not a sure thing. In 2022, the median homeowner’s net worth was roughly 40 times the median renter’s. But that overall trend masks the fact that while some individual owners see huge asset appreciation, in other cases, home values grow at the rate of inflation, and some owners actually lose money on their house. It also papers over how homeowners may be bringing certain attributes to the process that make it more likely that they’ll build wealth, like higher incomes and a propensity to save.

“Buying a house isn’t guaranteed to make you rich, or even to break even,” said Jenny Schuetz, vice president of infrastructure and housing at Arnold Ventures, a philanthropic organization focused on research and policy. “You can lose everything you have by being a homeowner, and so renting isn’t necessarily the worst outcome.”

A study by economists at Tufts University on the effect that homeownership has on the wealth trajectory of low-income households illustrates the importance of timing. The researchers followed the finances of renters in two cohorts, one of which started renting in 1984 and the other in 1999. Eventually, some renters became homeowners, which allowed the researchers to better understand how the purchase affected their ability to build wealth.

Those low-income households that began renting in 1984 and then bought a house saw their wealth go up on average compared with the low-income households that remained renters. But the households in the 1999 cohort that subsequently bought a house saw their wealth go down on average compared with the low-income households that remained renters, because they went through the 2007-09 recession.

Many in the second cohort had mortgages with relatively high interest rates and then ended up in foreclosure, said Jeffrey Zabel, one of the authors of the paper. “And if you don’t have a house, you don’t have any wealth,” he said.

“It depends on what happens to the housing market. You can’t really predict it,” Zabel added.

See also: 30-year mortgage rate jumps to 7.17% — a nearly 2-year high — in the latest blow to the housing market

The high prices and high interest rates of the current period mean it’s harder for people to afford homes. And home values — and therefore, the wealth that homeowners can accumulate from their houses — have little room to grow, Zandi said.

“Renting feels more attractive than owning a home at this point for most people in most parts of the country,” Zandi said.

Some look beyond homeownership to achieve financial security

Some young adults are looking at this particularly challenging housing market and deciding to build wealth in other ways. From the time Patrick Yaghoobians was 20 years old, he’s been putting aside money to buy a home. But recently, he decided to invest those funds in something else: launching his own financial-planning business.

“Even though I had a decent amount saved, it was nowhere near what was needed, especially in Southern California, to buy a property,” said Yaghoobians, who is now 30. Before he started his business, Yaghoobians had saved up about $45,000. “I had to make a conscious shift in what that bucket of money was for, and moved it from a housing fund to now a business fund,” he said.

Yaghoobians views that decision as an investment in himself. In addition to pouring money into his business, he’s making sure to put away enough funds for retirement, and he’s saving on housing costs by living with his parents. Although he once thought owning a home would be a way for him to achieve independence and build wealth, Yaghoobians has changed his calculus.

“It just feels like homeownership is not a top priority anymore, because it’s kind of gotten so out of reach for our generation,” he said.

A major reason homeownership underpinned wealth for previous generations is that a mortgage can function as a sort of forced savings account. Part of each mortgage payment typically increases the owner’s stake in the home.

“That’s probably the most important channel through which buying a home builds wealth,” said James Choi, a professor of finance at the Yale School of Management, who has challenged traditional personal-finance advice in his research.

The earlier someone becomes a homeowner, the more equity they may be able to accumulate in their home by retirement, assuming about average annual appreciation. They can also end up with significantly lower housing costs at a time when they might have a fixed income. Take a 30-year-old who buys a home for $405,400 — around the median price in the U.S. — using a 30-year mortgage. By the time that person turns 65, they will have nearly $1.6 million in home equity and no monthly mortgage payment, according to a calculator developed by Zandi. But if they wait until age 40 to buy that house — an increasingly common scenario — their housing wealth will be slightly more than $1 million at 65 and they’ll still be making mortgage payments. And if they buy at age 45, they’ll have $888,281 in equity when they’re 65 and will be on the hook for monthly payments for the first 10 years of retirement.

These calculations assume a 6.1% mortgage rate, a 20% down payment and a 4% annual home appreciation rate.

People who are priced out of buying a home can still build wealth without owning one. In many of these scenarios, someone who rents for decades actually comes out ahead, wealthwise, if they’re able to invest a relatively significant sum — about $800 a month in the early years of building their portfolio, according to Zandi’s calculator. That assumes an 8% annual stock-market return and 3% annual rent increases.

“It’s not clear that there’s this huge financial advantage to owning a home if you are saving outside of the home,” Choi said.

Caleb Pepperday is a financial planner who works with clients who are largely between 30 and 50 years old and are physician assistants. Many of them own homes, but he says the ones that don’t aren’t necessarily rushing to buy. In some cases, they’re seeing that home prices and interest rates are so high that investing in a house doesn’t feel worth it right now. In the meantime, these clients are saving in buckets outside of retirement accounts to give themselves the option to use that money to buy a home at some point — or simply to continue to build wealth.

Pepperday has personal experience with both arrangements. He and his wife owned a home in Pittsburgh and lived there for two years, then sold it when his wife, who works as a physician assistant, was offered a job in Montana. For now, they’re renting.

“We don’t know how long we’re going to stay here, so we didn’t want to lock up money in a house,” he said.

For clients who are renting, Pepperday looks for ways to help them put their money to work besides investing in a house.

“We’ve seen parents or grandparents use homes as the way to build wealth,” he said. “Now there’s alternatives that potentially weren’t around back when my parents and my grandparents were around. People are starting to understand that buying a house isn’t the only way to build wealth.”

Americans have easier access to investments outside of housing than previous generations did, Zandi said — pointing to the popularization of index funds launched in the 1970s and automatic 401(k) contributions. “The stock market is just a much bigger market, just a much more liquid market” than it used to be, he noted.

But an investor who is relying on the stock market to build wealth needs the psychological fortitude to keep putting money into the market, even during a downturn, he added. “Investing in housing is much more straightforward,” Zandi said.

Some younger homeowners and renters challenge the idea that a home should be their primary asset.

Jesse Beeler first became a homeowner when he was 23 years old, and since then, he has sold that house and bought another one. Still, Beeler — who lives in Greencastle, a small city in the south-central part of Pennsylvania — said he might have chosen to rent if he lived in a different location with a more robust rental market, and if he hadn’t internalized the financial advice of his parents’ generation when he was in his early 20s.

“I don’t know if the rewards of owning a home match the risk profile of today’s economy,” said Beeler, who is now 30. “It’s kind of an investment that you can’t really get to without either borrowing against it or selling, which then upends your life. For me, it just doesn’t feel like it’s liquid enough.”

Given today’s relatively high interest rates, Beeler, who works in supply-chain finance, said he feels like he’s paying a premium to the bank to own his home, although he recognizes there are benefits to owning. He and his wife, who is a teacher, were able to buy a place that’s close to family and to the school where she works. They also have the opportunity to increase the value of their home by renovating the kitchen and doing other projects.

Nonetheless, he’s skeptical that owning a home can be a reliable source of wealth, and when he looks at retirement projections, he doesn’t factor in his home. The idea — prominent among his parents’ generation — that you need to own a home to achieve financial independence is “pretty flawed,” he said. “It was passed heavily on to me.”

Still want to buy a home? It might get easier.

For many, though, the desire to own a home isn’t all about building the biggest nest egg. Instead, it’s about stability, being part of a community or getting access to a particular type of housing.

“The types of things that are available to buy are different from the types of homes that are available to rent,” said Choi. Though developers are building more single-family homes specifically as rentals, that kind of housing stock is typically more readily available to buyers. And if you want to be able to make changes to your living space over time and you plan to stay in the same location long term, buying can make sense.

The tax code provides some advantages to homeowners, and a mortgage allows buyers to own a large asset with a relatively small initial investment. Though the total annual cost of homeownership has become more difficult for buyers to predict in recent years, given rising insurance premiums and property taxes, owning a home with a fixed-rate mortgage can help stabilize your housing costs.

And in a period of high inflation, like the one we’re living through now, a 30-year fixed-rate mortgage can act as an inflation hedge. As prices broadly go up, your payment can, over time, feel like less of a burden. For example, the median mortgage payment for homeowners who moved in 2024 and 2025 was $2,300, according to the Federal Reserve. After 10 years, that $2,300 will feel like about $1,700 today, assuming a 3% rate of inflation.

And although we’re living through a historically challenging period to purchase a home, the good news is that there are signs it may get easier. Because prices are so high right now, there’s little room for them to keep growing, according to Zandi.

“You could get affordability restored not because you have more supply, but less demand,” he said, noting that it’s “almost a demographic certainty as you move into the 2030s.” The drop in U.S. immigration is likely to dampen demand for homes, according to Zandi, while the declining birth rate, coupled with aging baby boomers who will be letting go of their homes in the coming years, could also play a role in decreasing demand.

For years, Zandi has been saying some version of the line that, for most people, renting makes more sense than buying a home. But as the years go by and the demographic realities start to change, he thinks he may be saying that with less and less confidence, until it’s no longer true.

In Los Angeles, Saunders says it’s hard to imagine that future, at least for now. When she looks around at her peers, most are renting or living with their parents. Many, like her, are struggling to keep up with the expenses of daily living, let alone setting aside enough money to invest in an asset like a home.

Sometimes, Saunders wonders whether the path she followed — go to college, get a job — would have led to her owning a home if she’d come of age in a different generation.

“I had to quell those desires for homeownership as I continue to see the price of everything grow exponentially,” she said.

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