Homeownership Is the Top Obstacle to the American Dream for Many—Here’s What You Can Do

Homeownership has long been a cornerstone of the American Dream—so much so that a white picket fence is synonymous with stability. But for many Americans, that aspiration feels increasingly out of reach. According to Investopedia’s 2025 American Dream Survey, 77% of consumers believe that homeownership is more difficult to achieve today than it was for previous generations.

Let’s explore what makes buying a home today such a daunting task, some practical strategies for overcoming those challenges, and whether or not homeownership still belongs in the modern American Dream.

Why Homeownership Is So Challenging Today

There are many factors pushing homeownership further out of reach for the average consumer, which is why 41% of American Dream Survey respondents who dream of owning a home fear they’ll never be able to afford one. Let’s explore the most significant contributors to the issue.

Economic Factors

Current economic conditions are the most commonly cited barrier to achieving the American Dream, with 75% of American Dream Survey respondents naming them as the biggest challenge. At 58%, high home prices are the most commonly cited barrier, followed by rising living costs (51%), and high mortgage interest rates (47%).

“Since before the pandemic, single-family home prices are up by 60%,” said Josh Bodin, senior vice president at Berkadia. “At the same time, the average mortgage rate has jumped from the mid-high 3% range to the mid-high 6% range.”

“Additionally, other costs associated with owning a home, like taxes, insurance, utilities, and maintenance, have increased in line with, or at a greater pace than inflation,” Bodin said. “Wage growth over this period has not kept up with the pace of increase, leaving more prospective buyers unable to handle the financial burden of homeownership.”

Limited Inventory

Housing affordability may be the primary concern among consumers, but there are more fundamental issues at play. Arguably, the most significant is the steadily worsening housing shortage, which is only driving up home prices further.

“The biggest obstacle to homeownership today comes down to one word: supply,” said Scott Menard, president of Homes Built For America. “Prices and rates get all the headlines, but the truth is, if we don’t build enough attainable, entry-level homes, then first-time buyers will always be boxed out.”

“Many homeowners are holding on to their existing properties due to low mortgage rates from previous years, further reducing inventory available for prospective buyers,” said Colin Allen, executive director at American Property Owners Alliance. “Institutional investors, who buy up housing inventory to flip or rent out for profit, also remove those units from those available for individual buyers.”

These dynamics have had the greatest impact on millennials and Gen Z: 41% of Gen Z and 42% of Millennials who dream of owning a home are concerned they’ll never be able to. These young buyers are still relatively early in their careers, when incomes tend to be lower, and often carry significant student loan debt. As a result, the median age of first-time homebuyers reached an all-time high of 38 years old in 2024. That’s three years older than it was in just 2023—and up from the late 20s since 1980.

Credit Access

Affordability and supply issues might be the primary obstacles to homeownership, but access to credit can also be a challenge for some prospective buyers. According to Federal Reserve survey data, between 2024 and 2025, banks have tightened lending standards for certain residential real estate loans, especially non-conforming mortgages.

At the same time, the average U.S. credit score declined in October 2023 for the first time in more than a decade. This is another reflection of the economic environment, including high interest rates, persistent inflation, and rising household debt.

Once again, the younger generations are the most vulnerable to these trends. Not only are their credit files naturally thinner, but they also tend to have lower incomes and less savings to fall back on.

Saving for a Down Payment Without Sacrificing Financial Health

With record-high price-to-income ratios in the housing market, the prospect of saving enough for a down payment can be daunting—especially while juggling other financial priorities, like paying down debt and saving for retirement.

Here are some practical strategies to help you work toward homeownership without compromising your broader financial health:

• Build a strategic spending plan: Track your expenses for a few months, then trim costs where possible to maximize the cash you can allocate toward your savings goals. For example, you might try meal planning to cut restaurant costs, negotiating insurance premiums, or carpooling to save on gas and maintenance.
• Automate your monthly savings: Pay yourself first by automating monthly contributions to your long-term goals. Consider saving for retirement with payroll deductions, pre-scheduling debt payments, and setting up monthly bank transfers into a high-yield savings account (HYSA) for your down payment.
• Expand your income streams: There’s only so much you can cut from the budget, but there’s no limit to what you can earn. For example, taking on freelance work, subletting a spare room, or launching a side hustle can significantly increase your savings rate.
• Leverage first-time buyer programs: Many state and local governments offer financial aid for first-time homebuyers, such as assistance with down payments or closing costs. For instance, the Los Angeles Housing Department’s Moderate Income Purchase Assistance (MIPA) program offers loans to cover both. 
• Consider low down payment loans: Many loan programs allow you to buy a home with less than 20% down. For example, Federal Housing Administration (FHA) loans allow for down payments as low as 3.5% and are open to all consumers, assuming you meet the credit and income requirements.

“Mathematically, 20% down may make sense, but it can take eight years to save $80K for a $400K house at $10K/year, and by then housing prices may have increased faster than your savings,” said Eric Croak, CFP, President of Croak Capital. “I’d argue that 10% down and six months’ expenses in reserve is a safer bet than stretching for an arbitrary goal that postpones homeownership.”

Alternative Paths to Homeownership

If traditional savings strategies aren’t working or you’d prefer to take a different approach, consider some of the alternative paths to homeownership. These aren’t right for everyone, but they can help bridge the gap for certain prospective buyers.

Some of the most promising include:

• Co-buying: Purchasing a home with friends or family allows you to pool resources and share responsibility for costs. It’s becoming an increasingly popular strategy, with 21% of homebuyers co-buying in 2023. It was slightly less common in 2024, but remained prevalent, accounting for 15% of purchases.
• Rent-to-own contracts: These agreements give you the option to purchase a property after renting it for an agreed-upon period. Typically, your landlord sets aside a portion of each rent for your future down payment, which is based on a purchase price you negotiate upfront.
• Shared equity programs: These involve a nonprofit organization or government agency funding part of a home purchase for a lower-income family. In exchange, the buyer agrees to limit their eventual sales price so that another lower-income family can purchase the home in the future.

“Investing in fixer-upper single-family homes that are in need of updates or repairs is also a great alternative path,” said Allen. “Fixer-uppers usually sell for far less than move-in-ready homes. While you may need to budget extra for repairs and remodeling, it is a great way to begin investing in real estate and building equity.”

Living the American Dream Without Owning a Home

The American Dream has long been centered on upward mobility: the idea that hard work can lead to a better, more prosperous life. Historically, homeownership was seen as a hallmark of this process, giving families a chance to build equity and benefit from asset appreciation.

But times have changed. Homeownership is less attainable and not as universally beneficial. Other investment opportunities have become more accessible, often offering greater liquidity and potentially higher returns. In addition, most modern career paths no longer involve staying with one company for decades. The median employee tenure was just 3.9 years in 2024, making the mobility of renting more valuable.

Today, consumers associate the American Dream with goals like retiring comfortably (86%), affording quality health care (86%), and living debt-free (84%) just as much—if not more than—owning a home (85%).

“Is homeownership necessary to achieve the American Dream? Honestly…no,” said Croak. “Owning stock in real estate investment trusts, fractional shares of rental portfolios, or even a small business can provide the same (or better) wealth growth. The idea that equity must come through a physical house with a picket fence is outdated.”

“What matters more is owning appreciating assets, building net worth, and having control over your lifestyle,” said Croak. “The American Dream has always been about security and choice, and that can be achieved through flexible, diversified wealth strategies, not only through bricks and mortar.”

The Bottom Line

Affording a home is the most significant obstacle to the traditional American Dream. Record-high prices—fueled by the national housing shortage—along with inflation, elevated interest rates, and tighter credit standards have made homeownership more challenging than ever.

Saving for a down payment is still possible with the right budget and a strong income, especially if you leverage first-time buyer assistance, low-down-payment loans, or tactics like co-buying. But before you stretch your finances, consider whether homeownership is really your dream or an outdated definition of success.

Methodology

Investopedia surveyed 1,263 adults living in the U.S. from January 28-February 6, 2025. The survey was fielded online via a self-administered questionnaire to an opt-in panel of respondents from a market research vendor. Quotas were implemented in sampling using benchmarks from the American Community Survey (ACS) from the U.S. Census Bureau for region, and age ranges (18-24, 25-44, 45-64, 65+), and within each age range: gender, race/ethnicity, and household income.