For generations, buying a home has been a cornerstone of middle-class financial security in the U.S. But with home prices continuing to climb and showing few signs of falling, many middle-class families are starting to wonder: What happens if owning a home simply becomes out of reach?
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Experts weighed in on the causes of rising housing costs, what the future might hold and how the middle class can adapt if homeownership becomes the exception rather than the rule.
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What’s Driving Up Home Prices?
Ever since the housing market bubble crash and subsequent recession that began around 2008, housing prices have been on a steady upward spike. Members of the middle class are concerned that they may not be able to afford a home in the future.
Andrew Fortune, a realtor and owner of the real estate brokerage Great Colorado Homes, blames inflation as “the number one factor” responsible for high home prices.
“Many people feel that they have earned money by watching their home prices rise, but in reality, their home prices are just keeping up with inflation,” he said.
However, home unaffordability has been exacerbated by “underbuilding, zoning laws and construction costs,” according to Elena Novak, a real estate and home improvement expert at PropertyChecker.com.
This has driven up prices and “left us with a major housing shortage and rising prices that are outpacing wage growth,” she said. Homeownership for those under 35 and middle-class families “has been moving downhill ever since 2008.”
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Are High Prices Here To Stay?
Unfortunately, this price increase may be a “permanent shift,” Fortune said. “When inventory gets too high, prices may drop slightly, but not by much. The real estate market has to reflect the large amount of money printed during COVID. It’s all balancing out right now,” he said.
While Novak feels that it is hard to make predictions with the current economic and political shifts, she sympathizes with middle-class families who feel like affordable housing is becoming a thing of the past.
“If interest rates come down, there might be a small window for families to jump in, but it’s gonna stay competitive even in this scenario,” she said.
Who Is Hardest Hit?
Those who will struggle the most to afford a home will be first-time buyers and younger generations, Fortune said.
“The ability to buy a home will be slow for [millennials, Gen Z and younger]. Home prices have doubled in the last 10 years. This has slowed the real estate markets dramatically. The generations that bought and sold during that time accumulated a great deal of wealth from that period. The next 10 years are likely to be slow,” he said.
What Happens If the Middle Class Can’t Buy?
Buying property has always been one of the easiest ways to build wealth and plan for retirement in the U.S., Novak pointed out. “Without that option, middle-class Americans could find it harder to save and build generational wealth,” she said.
While renting keeps a roof over people’s heads, it doesn’t build equity or a return on an investment. “Over time, that will widen the gap between rich and middle-class families, and not just financially. The emotional toll of feeling stuck could hit hard, too,” she said.
More Co-Living Trends
Fortune already sees co-living becoming more popular in response, and imagines that may continue and even increase over time.
Novak said it’s also becoming more realistic for families to live with their aging parents to simplify the costs and hassles of caregiving. Moreover, high home prices are forcing people to rethink what “home” means.
“Modular homes offer faster builds at lower costs, giving buyers a chance to own without the traditional construction timelines and expenses,” Novak said.
She doesn’t see these as temporary alternatives but rather shifts “toward more flexible, financially sustainable living models.”
Policy Reforms
It’s hard to say if any significant policy reforms could help the problem, Fortune said. He favors less government interference in regulating or subsidizing housing.
“I believe that the more the government gets involved, the worse our problems get,” he said.
While Novak suggested it’s not a simple fix, she does see the benefit of laws to support affordable loans and lower interest rates for certain income levels. “If things are left alone to unfold naturally, they will undoubtedly worsen. So, yes, the government should take an active role in regulating subsidized housing markets to ensure that everyone can afford housing.”
Additionally, modifying zoning laws to allow more homes in certain areas could also assist some families with buying homes, she said. For example, “Typically, accessory dwelling units (ADUs) are not considered legal homes, but if the government were to legalize these units, that could open an entirely new affordable market to homebuyers,” she pointed out.
Building more affordable housing in urban areas or on public land could also help.
Broader Economic Consequences
In addition to personal challenges for middle-class families, a pricey housing market means “rents will increase to levels never seen before. More corporations will own homes and the middle class will suffer for it,” Fortune said.
Novak sees a mostly-renting middle class as one that could have less disposable income, which could slow consumer spending, hurting the economy.
“The middle class is directly linked to the health of America’s economy. Social and economic instability could result if things don’t change,” Novak said.
There’s Still Hope
There’s still hope for a financial safety net, even if you can’t buy a house, Novak said. “Sometimes, buying puts people under even more financial stress. Middle-class families can still build stability by managing money smartly, like getting a second job, cutting unnecessary expenses and staying strategic with debt.”
Keeping debt low and being intentional about loans can free up cash for saving and investing.
While the path to homeownership may be narrowing for many in the middle class, financial stability is still possible with smart planning and adaptability.
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This article originally appeared on GOBankingRates.com: What If Houses Get Too Expensive for the Middle Class To Buy?