With home prices in the United States climbing faster than incomes, even young high earners are putting off buying a home, choosing to rent and invest in stocks instead.
MarketWatch reported on the 5th that some young high-income households are living in rental housing rather than taking on a mortgage, putting the down payment they would have made and the monthly savings on housing costs into financial assets.
According to Harvard University's Joint Center for Housing Studies, the median price of a single-family home in the United States was five times median household income in 2024, up from 4.1 times in 2019 and 3.2 times in the 1990s. Home prices rose 48% between 2019 and 2024, while household income grew just 22%.
High prices combined with borrowing costs have made renting cheaper than buying in the near term in major cities. Realtor.com's analysis of the 50 largest U.S. metropolitan areas in July found median monthly rent of $1,695, compared with a monthly cost of $2,553 for buying a home with a 10% down payment and a 30-year fixed-rate mortgage, including taxes, insurance and maintenance fees. The gap is $858 a month.
Against that backdrop, the number of renter households earning $175,000 or more a year has risen by 1.2 million over the past decade. About 33% of those households were headed by someone aged 25 to 34, and 26% by someone aged 35 to 44 — age groups that traditionally accounted for most first-time home purchases.
MarketWatch also profiled Natalie and Dan Slagle, financial planners in Portland, Oregon. The couple tried to buy a home but lost out to competing bidders, then reconsidered whether they needed to buy at all and stopped looking.
The couple now pays $4,000 a month in rent and invests about $2,000 — the difference between that and the mortgage payment they had expected — in retirement accounts and brokerage accounts. Natalie said they built their financial plan on the assumption that they would rent for life.
Some analysts argue stocks can build wealth more effectively than housing. According to Aswath Damodaran, a professor at New York University's Stern School of Business, the total return on the S&P 500 with dividends reinvested has outpaced the rise in property prices over the past 10 years, the past 50 years and the entire period since 1928. It is a simple comparison, however, that does not account for the value of living in a home, the use of leverage, or taxes and maintenance costs.
Mark Zandi, chief economist at Moody's Analytics, calculated that assuming home prices rise 4% a year and stocks return 8% a year, someone who buys a home at 35 and someone who invests the monthly savings from renting would end up with similar wealth by 65. But for a renter to accumulate wealth comparable to a homeowner, the savings must be invested consistently for decades without being pulled out during market downturns.
MarketWatch concluded that combining renting with stock investing is not a solution available to every tenant. It is a relatively realistic strategy for high earners with stable incomes who can invest the money they save by not buying over a long period, the outlet said.
