New economic data show an unprecedented number of young adults are forgoing homeownership in favor of renting: From 2012 to 2023, affordability worsened, yet young adults who could buy continued to do so. But not anymore. Now young adults are remaining renters, not just because of affordability, but because flexibility makes them more resilient to economic downturns. This shift could usher in a new phase in the economy where the precarity of the labor market compels Americans–especially younger Americans–to make short-term choices that jeopardize their long-term financial security.
The implications of these trends are bigger than just housing markets. The American dream is part of our American identity and part of our tax code. The U.S. tax code assumes a universal interest in home ownership, and it transfers wealth from renters to the homeowner class. If the U.S. is to be a place where ownership is not a shared goal, the effects on inequality will be stark and will exacerbate problems already in place.
First-Time Homebuyers Are Older Than Ever—And Less Common
Buying a home used to be a rite of passage for young, middle class, adults. From the 1980s through the 2010s, the median first-time homebuyer was someone in their early thirties or even late twenties. But those kinds of young, first-time buyers have become increasingly rare according to research from the National Association of Realtors. In 2024, the median age of the first-time homebuyer reached a record high of 38, the oldest age dating back to 1981. Meanwhile, the share of first-time buyers (of all ages) has plummeted to a historic low of 24%, well below the historical average of 38%. This has resulted in a stagnated homeownership rate for young adults— just 33% of 27-year-olds owned their home in 2024, compared to 40% of baby boomers when they were 27.
In some ways, this is the same old story of an unfair economy where the rungs on the ladder to success keep getting farther apart, keeping those with wealth securely at the top while others struggle to climb. For years, existing homeowners have benefited from rising home values, and many now enjoy cheap mortgages with record-low mortgage rates, too. Meanwhile, first-time homebuyers face high home prices and high mortgage rates. But in 2024, housing affordability didn’t worsen; it improved slightly with the median mortgage payment growing slower than median income. Currently, the supply of homes is increasing, giving buyers more homes to choose from and, consequently, more power to negotiate lower prices. Despite all these improvements to the housing landscape, young adults are shunning homebuying and remaining renters.
Renters Have Better Flexibility Than Homeowners in Uncertain Times
Renting affords young adults a degree of flexibility that may feel necessary as the danger of a recession looms. Research from the Census Bureau shows that individuals who move to new metropolitan areas for work fare better than those who stay put during their job search. Among those who lose their jobs to trade wars, DOGE, and other sharp turns in the economy, renters will find it easier to move and adapt than homeowners because it is easier to break a lease than it is to sell a home.
For Some Workers, a Return to Office Is a Return to Renting
During the pandemic, the ubiquity of remote work allowed people to find jobs outside their metro without moving. That flexibility, combined with record low mortgage rates, made homebuying incredibly attractive, especially for people who couldn’t afford to buy within the everyday commute distance of their jobs. But now, 30-year fixed mortgage rates are more than double what they were in 2021, and workplaces are mandating that employees return to the office. The federal government, the state of California, JP Morgan, and Amazon have all called workers back to the office 4-5 days a week. Working in person, in D.C., New York City, or Seattle means living where home prices are exceedingly high, and homeownership is extraordinarily out of reach. Apartment rents are also high in these cities but not as high as mortgage payments for comparable condos.
Climate Changes Makes Homeownership Riskier Than Renting
On top of employment uncertainty, young adults are making decisions that are affected by climate uncertainty. Young people will experience more consequences of climate change than older people, and it will impact their finances more. Owning a home exposes a person to more financial risk than renting one. This fact was devastatingly apparent during Hurricane Helene and the recent Los Angeles wildfires.
High Mortgage Rates Make Renting More Affordable Than Buying
Of course, getting a notice of a rent increase from the landlord has always been a strong motivator for a renter to consider homeownership. However, right now, renters aren’t experiencing that kind of motivation. The U.S. is at the tail-end of a boom in the construction of multifamily homes, which started during the pandemic and has increased the share of rentals sitting vacant. As a result, apartment rents will likely stay flat this year, and that will encourage more renters to remain renters.
If Homeownership is No Longer the Goal, Housing Policy Must Change to Better Support Renters
Panic over young people’s delayed entry into the housing market is nothing new. In the 2010s, Millennials were turning away from homeownership. However, once the economy recovered and their financial situations improved, the Millennial homeownership rate increased to near that of Gen-X and Baby Boomers when they were the same age. Additionally, household growth is slowing, which could mean less demand and lower prices for homes in the future. However, the uncertainty in the economy could continue to make the flexibility of renting more appealing than the commitment of homeownership: When every election is the most critical election so far, and every year the nature of work shifts with the culture, and every year there’s a record breaking natural disaster, it’s hard to imagine young adults wanting to anchor themselves in place with homeownership.
The continuation of this trend amounts to a significant problem for the health of the U.S. economy given the current systems that reward homeownership. One policy solution to address worsening inequality, is reducing federal tax deductions for mortgage interest and local property taxes and creating tax credits for rental payments. Rental tax credits could be automatically invested in retirement accounts to make investing as automatic for renters as it is for homebuyers. Homeownership may be the most common way for Americans to build wealth, but it isn’t the only way, or even the best way. Young adults are adapting to the times, and so should our financial policies and systems.
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