Survey: Homeownership still has starring role in the American Dream — but affordability plays the villain

Homeownership remains a centerpiece of Americans’ financial aspirations — but with home prices at record highs and mortgage rates near a generational peak, would-be homeowners are struggling to achieve that piece of the American dream.

A new Bankrate survey finds that fully 78 percent of Americans consider homeownership a key component of the American dream. Americans placed a higher value on it than on any other indicator of economic stability, including a comfortable retirement, a successful career or a college degree.

Still, 78 percent of hopeful homeowners say affordability challenges have blocked them from buying.

Bankrate’s key insights

Homeownership and the American dream

We asked Americans to pick which life milestones they considered part of the American dream. Respondents could choose as many options as they wished.

Owning a home is still the biggest piece of the American Dream, cited by 78 percent of respondents. The next closest are being able to retire and having a successful career (65 percent each), followed by owning a car, truck or other automobile (54 percent), having children (45 percent) and getting a college degree (35 percent). Just 6 percent cited none of those as components of the American Dream.

Among age groups, baby boomers (88 percent) and Gen X (83 percent) are more likely to agree that owning a home is part of the American Dream than the millennial (71 percent) and Gen Z (68 percent) cohorts. However, owning a home was cited more than anything else among boomers, Gen X and millennials. Among Gen Z, having a successful career (70 percent) edged out owning a home.

Regionally, the belief that owning a home is part of the American Dream is a bit stronger in the Midwest (82 percent) and South (80 percent) than in the pricier West (76 percent) and Northeast (73 percent). That sentiment also is stronger in rural areas (87 percent) than in cities (71 percent).

Affordability obstacles loom large

We asked aspiring homeowners to cite obstacles to ownership. They could choose more than one barrier.

The factors holding back aspiring homeowners from buying center around affordability, with the most common responses being lack of income (cited by 56 percent), home prices being too high (47 percent) and not being able to afford a down payment and closing costs (42 percent). In all, 78 percent of aspiring homeowners cited at least one of these affordability factors.

“Owning a home is still the centerpiece of the American dream, but affordability is the main obstacle to making that a reality,” says Greg McBride CFA, Bankrate’s chief financial analyst. “Aspiring homeowners point to the combination of insufficient income, high home prices and not having saved enough for the down payment and closing costs as the dominant pain points.”

Factors such as high mortgage rates (28 percent), credit not being good enough (26 percent), not being ready yet (25 percent) and too much debt (18 percent) were cited less frequently. Results exclude the 8 percent of non-homeowners who do not wish to own a home under any circumstances.

Among aspiring homeowners, affordability issues were cited most frequently in rural areas (85 percent) as compared to suburbs (79 percent), towns (77 percent) and cities (76 percent). The driver of this difference was that 68 percent of rural respondents cited not having enough income, notably higher than those in suburbs (57 percent), cities (53 percent) and towns (51 percent).

As for the different factors holding back aspiring homeowners, down payment and closing costs were cited more frequently by women (47 percent) than men (36 percent), and less frequently by those in the Northeast (32 percent) compared to those in the Midwest (43 percent), West (43 percent) and South (45 percent).

Having too much debt was cited by millennials (25 percent) more than by Gen X (17 percent), boomers (16 percent) and Gen Z (13 percent). Not surprisingly, Gen Z was far more likely to say they’re not ready yet (43 percent) than millennials (24 percent), Gen X (17 percent) and boomers (6 percent).

Americans are willing to make sacrifices

We asked aspiring homeowners what compromises they would make to find more affordable housing. Again, they could choose multiple options.

While there’s no clear consensus on the tradeoffs Americans are most willing to make, fully 69 percent said they were willing to give up something.

Cited most frequently among those willing to make at least one sacrifice are downsizing living space (44 percent), moving out of state (34 percent), buying a fixer-upper (34 percent), moving farther from family and friends (26 percent), taking on roommates or additional family members (24 percent), moving to a less desirable area (20 percent) and moving farther from work (17 percent). Results exclude the 31 percent of Americans that wouldn’t be willing to do anything to find more affordable housing.

The 31 percent of Americans who are unwilling to do anything to find affordable housing skews older — 40 percent of boomers and 33 percent of Gen X compared to 24 percent of millennials and just 19 percent of Gen Z. Otherwise, there were no significant differences among income, gender or region.

Among those willing to take steps to find more affordable housing, women (49 percent) are more likely than men (39 percent) to say they’d be willing to downsize living space, but men are more likely to consider moving to a less desirable area (24 percent versus 15 percent of women) or move farther from work (20 percent versus 15 percent of women).

Those in the Northeast (40 percent) are most willing to move out of state, and those in the Midwest (27 percent) the least likely to do so. Those in the West are the most willing to move to a less desirable area (27 percent), while those in the Northeast are the least likely (14 percent).

Downsizing to find affordable housing is the most common step across gender, region and income bracket. It is also most common among boomers and Gen X. However, millennials are split between downsizing, moving out of state and buying a fixer-upper (at 33 percent each), while Gen Z are more likely to take on roommates or additional family members (38 percent).

Tips for would-be homeowners

Housing affordability challenges aren’t going away. Here are some strategies first-time buyers are trying:

• Consider joining the affordability migration. Home prices vary widely across the U.S To qualify for a mortgage on a median-priced home in California, for example, you’d need an annual income of nearly $200,000, according to Bankrate’s Home Affordability Data Study. In states such as Arkansas, Indiana, Kentucky, Mississippi and Ohio, an income of $65,000 qualifies you for a mortgage on a typical home. Of course, moving away from friends and family isn’t easy, but remote work has given many Americans the opportunity to take their big-city paychecks to places with small-town housing costs.
• Take advantage of down payment assistance. Every state has a down payment assistance program, and so do many local governments and employers. These initiatives help first-time buyers come up with money for a down payment. You’ll have to jump through some hoops in terms of completing forms and taking a homebuyer course, but the payoff can be worth the time and effort.
• Look for low down-payment loans. Yes, 20 percent down is the gold standard — but given the cost of homes in most of the country, it’s not realistic for many first-time buyers. Instead, look for a program that allows you to put down less. FHA loans, insured by the Federal Housing Administration, call for just 3.5 percent down, while VA loans, guaranteed by the U.S. Department of Veterans Affairs, require nothing down. In addition, there are conventional loans that require a down payment of as little as 3 percent.

FAQ

• Why are home prices so high?

  It’s Econ 101: There’s more demand than supply. The supply of homes for sales is squeezed in part because homebuilders haven’t been building at the same pace as they did before 2005. Another factor is the “lock-in” effect: Homeowners who refinanced their mortgages at 3 percent aren’t eager to give up their cheap money. As a result, there’s only a 2.9-month supply of homes on the market, a figure firmly in seller’s market territory, according to the National Association of Realtors. On the demand side, the millennial generation is a huge demographic group that has entered prime homebuying years.

• How many homeowners are there in the U.S.?

  There were 86.2 million owner-occupied housing units and 45 million renter-occupied homes in the U.S. as of the fourth quarter of 2023, according to the Census Bureau. The overall American homeownership rate is 65.7 percent, but that varies by race, income, age and location.

• What is the average single-family home price in the U.S?

  The median price of homes sold by Realtors in February 2024 was $384,500, according to the National Association of Realtors. While that number is down from an all-time high of more than $400,000 in mid-2022, it still was the highest ever for February.

• Methodology

  This survey was conducted using an online interview administered to members of the YouGov Plc panel of individuals who have agreed to take part in surveys. Emails are sent to panelists selected at random from the base sample. Total sample size was 2,317 adults. Fieldwork was undertaken March 6-8, 2024. The survey was carried out online. The figures have been weighted and are representative of all US adults (aged 18 and older).