The American Dream Is Now a Rental
What Happens When the Middle Class Can't Afford to Buy A Home
I used to think people who rented long term were making a mistake.
It turns out that they were just being honest about what they could afford.
Here’s the math: Nowadays, buying a home costs about 50% more per month than renting the same home. Affordability is at its worst level since the early 1980s. When buying costs 50% more per month than renting, owning a home stops being a goal and starts being a choice.
Let’s breakdown the math
In 2022, mortgage rates jumped from 3% to 7%.
Home prices did not drop because inventory stayed tight. At the same time, wages barely moved. The gap between what people earn and what homes cost kept getting wider.
Here is a little house math:
A home that rents for $2,500 per month might cost $3,750 per month to buy at current rates.
The real cost of owning that home is $4,500 per month. Here’s how: $3,750 mortgage, plus $400 in property taxes, $150 in insurance, and $200 in maintenance.
That is $2,000 more per month than renting. Over five years, that difference adds up to $120,000 in extra cash going out.
From 2019 to 2024, wages went up 20% but home prices went up 50%. Mortgage rates more than doubled but wages didn’t move as fast.
Meaning, housing costs skyrocketed and the math kinda stopped math-ing.
Think about it… if you want to buy your first home and you see that math gap, you naturally choose to wait. Also, if you already own with a 3% mortgage, you stay put.
The net result:
The resale market freezes.
The rental market takes all the pressure.
The important question is… why?
What is keeping the real estate market stuck?
Unfortunately, there are three things that are stopping the market from getting better.
1. Mortgage rate handcuffs
In 2020 and 2021, millions of homeowners locked in mortgages below 3%. Selling today means borrowing at 6% or 7%. Meaning, their monthly payment would double or triple for the same size loan.
When homeowners can’t afford to sell, inventory stays low and prices stay high.
2. Inventory gap
Since 2008, the U.S. built 4 million fewer homes than it needed. At current construction rates, it will take about 10+ years to catch up. When supply is scarce and rates are high, prices stay elevated.
3. Persistent demand
More than 6 million people are entering prime home-buying age before 2030. People still get married, have kids, and form new households even when they can’t afford to buy. That demand shifts from ownership to rental, keeping rental demand strong while the buying market freezes.
The history of renting in one paragraph
Renting used to be temporary.
First time buyers wait longer.
People who want bigger homes stay put.
Older people delay downsizing.
Mobility declines.
Rental tenure extends.
Meaning, You rented until you bought. Now renting probably turns into the normal way middle class families live for years.
We confused the vehicle with the destination
This is my hypothesis, which I will probably get a lot of flak for…
The American Dream was always about stability and moving up. If you dig deep, you may see that owning a home was just one way to get there. For 70 years, from 1950 to 2020, homeownership happened to be the best vehicle for both. You bought a home. You paid down the loan. The home appreciated. You built wealth.
Sounds simple.
But that path only existed because of specific conditions.
Interest rates declined for 40 years.
Government policy subsidized ownership through tax deductions and cheap mortgages.
Suburban land was abundant and cheap to develop.
As those conditions started to reverse: Rates went up. Land became scarce. Credit got expensive.
In essence, the vehicle stopped working.
The confusion is thinking the vehicle was the dream itself.
The dream was always stability and mobility. Homeownership was just how Americans achieved it from 1950 to 2020. Before that, most people rented.
This is not unique to ‘merica!
This already happened in most of Europe.
Germany has a 50% homeownership rate.
Switzerland has 42%.
France sits around 65%.
These countries have stable middle classes and strong economies with long-term rental markets. They never built their wealth model around homeownership.
I would argue that this continues for years if rates come down slowly.
Affordability is at 1980s levels.
Supply is constrained.
Mortgage lock prevents any quick reset.
The longer this lasts, the more the change starts to become permanent. Owning becomes something fewer people do. Renting becomes normal and long term.
When the vehicle that carried the American Dream for 70 years becomes inaccessible, the dream does not disappear. The vehicle changes. The new middle class stability might come from long-term rentals with secure tenure and wealth built through other assets instead of home equity.
For 70 years, we mistook the vehicle for the destination. The American Dream was never the house. It was the stability and wealth the house made possible.
Now we need to find another way to get there as we probably have to rent our white picket fence.
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can’t wait to read this one. great title & image.
Finally, we were able to buy a unit in Maui after renting for 23 years because our father-in-law left some funds for us. Otherwise, we couldn’t have afforded it. We have both been working hard for the past 20 years. We did not qualify for the affordable housing category, as our income didn’t fit. It was still too low to buy even an affordable home through the county. Your article is true.