The Increasing Barriers to Homeownership in the US

Home values in the United States have historically gone up over time. When accounting for inflation, prices are jerkier but still demonstrate an upward trend. This appreciation is a major reason why homeownership is seen as a path to financial stability and wealth building. However, barriers to buying a home in the US are getting higher. This article will analyze data on income and housing prices over the past 50 years to illustrate just how difficult it has become for middle and lower-income individuals to purchase real estate.

Housing Prices Outpace Income Growth

If we look at median US housing prices from 1972 to 2022, adjusted for inflation, it is clear that costs have far outpaced income growth over the past half century. In 1972, the median household income was about $10,000. The median home price at that time was around $29,000 – just three times the typical household’s annual earnings. An average family could realistically save up for a downpayment and get a mortgage.

Fast forward to 2022 and we see a very different picture. The median home price has soared to over $398,000 while the median household income sits at just $70,784. That means today’s average home costs over six times a typical family’s yearly pay. This stark difference demonstrates why homeownership feels out of reach to so many Americans nowadays.

Limited Housing Supply Drives Up Prices

In addition to income not keeping up with real estate appreciation, there is also a supply shortage that has bid up prices. The homeowner vacancy rate shows the percentage of homes in the US that are actually on the market and available for purchase. This metric is currently at an all-time low of just 0.8% – far below the historical norm.

Restrictive zoning laws are partially to blame for limited housing inventory. Municipalities frequently have regulations against building multi-family properties or constructing units at higher densities. This constrained supply, paired with high demand from buyers, pushes sale prices upward. There simply aren’t enough affordable properties for average families to purchase.

The Mix of Available Homes Skews Toward Luxury

Not only are there fewer homes on the market in general, but the mix of what is available has shifted dramatically toward higher-end properties. In 2018, nearly 40% of listings were under $200,000. As of late 2022, that figure has dropped to just 10% as budget buys have all but disappeared.

On the flip side, million-dollar homes used to make up around 10% of inventory and now account for a full 30%. Cost-burdened buyers find themselves competing for a shrinking sliver of moderately-priced options. This imbalance further ratchets up already steep asking prices.

Falling Mortgage Rates Used to Help Buyers

Thus far, the data paints a rather gloomy portrait of home affordability. However, there is one metric that historically moved in a more favorable direction: mortgage interest rates. From a peak above 18% in 1981, average rates on a 30-year fixed loan fell fairly steadily, bottoming out around 3% in 2020. This downwards trajectory helped counterbalance rising real estate values.

Cheap debt enabled buyers to take out larger loans while keeping monthly payments reasonably manageable. Unfortunately, in 2022 and 2023, interest rates have shot back up as the Federal Reserve moves to contain inflation. This negates a key factor that once improved housing accessibility for American families.

The Result: Monthly Costs Near All-Time Highs

When we combine elevated home prices and mortgage rates, the net result is that monthly housing costs as a percentage of income are approaching the highest levels ever seen. First-time homebuyers already face hurdles like saving up for a down payment and qualifying for a loan. Now their dollars do not stretch nearly as far once they do manage to purchase.

This helps explain why the US homeownership rate has fallen from a peak of 69% in 2004 down to just 65% as of late 2022. Owning real estate no longer provides the clear path to financial stability it once did. However, the picture may not be entirely bleak for those resigned to renting indefinitely.

Rethinking Real Estate as an Investment Vehicle

Housing is often characterized as a failsafe investment that always appreciates over the long run. But the truth is more complicated. The 2008 subprime mortgage crisis serves as one example where home values plummeted before eventually recovering years later. Stocks also declined during this period prior to rising to new highs.

No investment – whether in real estate or equities – moves up in a straight line without periodic pullbacks. While owning property has merits, it is risky to view it as a surefire way to build wealth. Renters still have opportunities to invest through retirement accounts, brokerage funds, and other vehicles.

Owning a Home Has Tradeoffs

Homeownership has undeniable financial and social advantages. However, it also involves major tradeoffs compared to renting. Down payments lock up capital that could be invested elsewhere. Monthly mortgage bills typically exceed rents, especially with interest rates on the rise. And owning a home comes with maintenance expenses that landlords cover for tenants.

While barriers to entering the real estate market are undoubtedly high today, conditions have fluctuated greatly in the past and will likely shift again one day. There are pros and cons to both buying and renting a residence. The best approach depends on an individual’s unique circumstances and goals.


Over the past half century, home prices have dramatically outpaced income growth in the US. Limited housing supply coupled with rising mortgage rates have put ownership out of reach for many families. While owning property was once a clear path to financial security, renters still have opportunities to build wealth through other investments.