Nearly Half of Middle-Income Renters Make More Than Their Parents but Still Can’t Afford Homes

The dream of homeownership is fading for thousands of middle-income Americans, according to a new survey.

Some 44% percent of middle-income renters say they earn more than their parents did at the same age, but that they still can’t afford a home, according to the survey from Neighbors Bank.

The survey collected the thoughts of 1,011 renters with a household income of $40,000 to $125,000. Based on the results, these middle-income renters feel the possibility of homeownership is slipping away.

Over the past few decades, home prices have risen far faster than incomes and overall inflation. From 1990 to 2024, the median sales price of existing homes increased more than 320%, according to data from the National Association of Realtors. Meanwhile, incomes rose about 180% over the same period, U.S. Census data shows.

The trend has only accelerated over the past several years, as home prices soared during the COVID-19 pandemic buying frenzy. Existing-home sales prices rose about 50% from 2019 to 2024, while incomes rose about 22%.

“That math may be inconsequential if we're talking about the price of lettuce, but when we're talking about something that costs hundreds of thousands of dollars, the average earner can't even come close to closing that gap,” Jason Gerstenberger, a financial advisor and retirement planner, tells Realtor.com®.

Of Neighbor Banks’ respondents, 68% said they wouldn’t even buy a home if a relative covered half of the down payment. Of those renters, many cited other obstacles such as still needing more of their own savings or home prices in their area being too high.

Others said their job and income aren’t stable enough yet. Of Gen Z renters, 11% said they are planning to move or are not ready to settle down, which creates a massive barrier to planning a home purchase.

Founder and real estate agent at The ARC Platform in Savannah, GA, Alexander Rodino, agrees that committing to one location is just as much of a struggle for young Americans as the cost of a home is.

“The buyers I sit with in their late twenties and thirties are not mainly afraid of the payment. They are afraid of being stuck,” Rodino tells Realtor.com. “They have watched people they know take jobs in other cities, get laid off, or need to move for family, and a house feels like a bet on staying put for five years in a life they cannot see five years into.”

“Price is what they say out loud. The commitment is what actually stalls them,” he continued.

Additional home costs, such as HOA fees and property taxes, increased insurance prices, and high mortgage rates are also viewed as barriers to homeownership.

Homeownership may not be as impossible as it seems

Nearly 3 in 5 middle-income renters feel that the “dream of homeownership is out of reach” and that the mortgage industry isn’t geared toward buyers at their income level, according to Neighbor Bank’s study. But that perspective may be on its way to changing.

However, the notion that homeownership is not affordable may a misperception in some cases, according to real estate broker and author at Shovel to Keys, Howard Jacobson.

“People believe what they hear. The louder and more frequent and consistent the message, the higher the likelihood that the message is believed,” Jacobson tells Realtor.com. “Today, the media, influencers, and many other sources say that homes are not affordable. The data says otherwise for many potential buyers, but the data is obscured by the messaging noise.”

Some renters may have misperceptions about what's required to buy a home. The new survey found that more than 9 in 10 middle-income renters (94%) don’t know a down payment can be as low as 3% to 3.5%, with more than half (55%) believing a 20% or larger down payment is required.

Financial planners such as Gerstenberger recommend setting a specific goal for how much you want your down payment to be and make necessary adjustments to save that amount.

“Saving for a house is more of a feeling than it is a plan. But once you set aside a concrete number that you need to hit, the savings plan can become more targeted.”

It’s also a good idea to begin budgeting as if you’re paying your future mortgage now, Gerstenberger advises.

“If your rent is 1,500 dollars and your mortgage is going to be 2,500 dollars, you need to find a way to set aside that extra thousand dollars each and every month automatically, just as if you had the mortgage right now,” he explains. “This works because it proves that the mortgage budget will survive, and it also creates the down payment you need to buy the house.”

Many middle-income renters first go to Google or a general internet search with questions about home buying, with only 8% going to a real estate agent and 6% going to a mortgage lender or loan officer, according to Neighbors Bank. However, this isn’t the best strategy for serious prospective buyers.

Los Angeles realtor and business consultant Neil Potts recommends speaking with a real estate agent and lender as early as possible when you begin looking to buy a home. 

“You can explain what you’re looking to do, explain your circumstances, and then they can help you to start putting a plan together to make it happen,” Potts tells Realtor.com. “The lender will also then be able to start getting a good picture of where you’re at, what you might qualify for, and generally being very proactive and transparent as early as possible will yield the best results.”