Is homeownership still a realistic element of the American Dream?

Millions of Americans over multiple generations have positioned owning their own home as a central pillar of the American Dream. But is it time for younger cohorts to give up on that?

The US housing market has been suffering over the past year or so, with higher mortgage rates and low supply weakening affordability and making it harder for first time homebuyers to enter the market – including those who are giving up renting to live with their parents.

There have been signs of recovery as the traditionally busy spring market got underway - pending home sales increased 6.1% in March, the greatest month-to-month increase since December 2023 (+7.0%), helped by mortgage rates decreasing by up to 30 basis points from earlier in the year, according to new data from the National Association of Realtors which puts the average rate at 6.55% in March.

But a new report BMO highlights a disconnect between the homeownership dream of young Americans - 71% of Millennials and 69% of Gen Z report owning a home is a significant life aspiration vs. 63% of Gen Xers and 61% of Boomers - and their belief, with around half of all generations saying the goal of homeownership seems unattainable in their lifetime (a figure that has worsened over the last five years).

“The data show that owning a home remains a key component of the American Dream, but with some obstacles still facing first-time homebuyers, younger generations worry they missed their moment,” said Paul Dilda, Head of US Consumer Strategy at BMO.

More than half of the two youngest generations of adults indicated that the American Dream is no longer about homeownership, although less than one third have a negative view of the investment potential of buying a home, despite most seeing it as a life milestone rather than an investment.  

Among non-homeowners, there are some clear financial priorities that rank higher than saving for a home for Gen Zs and Millennials including saving for their kids’ education or childcare (around 6 in 10 said this), saving for retirement (around half), and paying off credit card debt (around half).  

The BMO Real Financial Progress Index also highlights that seven in ten of younger generations who have bought a home said it was a bigger financial commitment than they expected and around half believe they will retire before they finish paying off their mortgage.

Nearly half of prospective Gen Z buyers plan to tap into their 401k, significantly more than Millennials and Gen X.

A majority of both Gen Z and Millennial homeowners report they are more dependent on family, such as “the bank of mom and dad”— 60% of Gen Z and 57% of Millennials say they could not have purchased a home without financial support from their families.

 “Poor housing affordability, limited inventory of existing homes, and rising interest rates make finding the right home that fits your budget a challenging endeavor,” said Scott Anderson, Chief U.S. Economist at BMO.  The good news is economic and financial conditions can change quickly, so it makes sense to start planning today. With the right conditions and early planning, younger Americans will still likely be able to attain their goal of homeownership.”

In the meantime, with the potential for the Fed to cut rates in response to the slowing economy, there could be positive movement on affordability, especially if home prices continue to ease.

In February, the S&P Case-Shiller Index rose 3.9%. This continues the trend toward slower sales that started in 2024 and reverses the previous two months of increased appreciation, which mostly reflected the weak 2023 year-end

Overall, appreciation for 2025 is expected to remain lower than in 2024, averaging about 3.2% nationally, according to Cotality (previously CoreLogic).