Is the American Dream Dead?

For generations, homeownership has been woven into our idea of the American Dream. Get an education. Find a good job. Save some money. Buy your first home. Build equity. Move up when your family grows. Eventually, perhaps, own the house outright.

But for many Millennials and Gen Z adults, that path doesn’t feel nearly as straightforward as it did for the generations before them.

So it’s fair to ask:

Is the American Dream dead?

I don’t think it is. But I do think the path to it has changed. And perhaps one of the biggest mistakes we can make is expecting today’s buyers to reach homeownership exactly the same way their parents or grandparents did.

Younger Generations Aren’t Necessarily Earning Less

There’s an important misconception we should clear up first. It’s often said that Millennials are the first generation to make less than their parents. The actual research is more complicated.

Federal Reserve researchers studied income across five generations and found that Millennials ages 36 to 40 had a real median household income approximately 18% higher than the previous generation at the same age.

So younger generations haven’t necessarily stopped making financial progress. What has changed is the relationship between income and some of life’s biggest expenses. Housing is one of the clearest examples.

Homes Have Become Much More Expensive Relative to Income

This is where the challenge becomes much easier to see.

According to Harvard’s Joint Center for Housing Studies, the national median single-family home price reached approximately five times the median household income in 2024. In the 1990s, that ratio was closer to 3.2. And between 2019 and 2024 alone, median single-family home prices increased approximately 48%, while median household income increased about 22%.

In other words, incomes increased. Home prices increased much faster. Then add higher mortgage rates, rising insurance costs, property taxes, childcare, student loans and rent. Suddenly, earning more than the generation before you doesn’t necessarily mean homeownership feels easier.

The First-Time Buyer Has Changed

Perhaps nothing illustrates this shift better than the age of today’s first-time homebuyer.

The National Association of REALTORS® reported that first-time buyers accounted for just 21% of home purchases, the lowest share since NAR began tracking the statistic in 1981. The median first-time buyer is now 40 years old. Forty. In the 1980s, the typical first-time buyer was in their late 20s. That doesn’t tell us that younger people no longer want homes.

It tells us they’re taking longer to get there.

The Down Payment Can Feel Impossible

This is where many potential buyers stop before they even begin.

They look at a $600,000 home and think:

“Twenty percent is $120,000. I’ll never save that.”

So they don’t call a lender. They don’t talk to a real estate broker. They simply assume they’re not ready. But here’s something every potential first-time buyer should understand: you do not necessarily need 20% down to buy a home.

Depending on the buyer and loan program, conventional, FHA, VA and USDA financing can offer substantially different down-payment requirements. And in Washington, there are also down-payment assistance programs that many potential buyers don’t realize they may qualify for.

Down-Payment Assistance Isn’t Necessarily What You Think It Is

When people hear “down-payment assistance,” they sometimes assume we’re talking about a program only for someone experiencing serious financial hardship.

That’s not necessarily the case. Washington has multiple homebuyer assistance programs with different eligibility requirements. For example, the Washington State Housing Finance Commission’s Home Advantage program currently offers qualifying borrowers down-payment assistance of 3%, 4% or 5% of the first mortgage loan amount, depending on the mortgage program.

The statewide income limit for that particular program is currently $180,000. Read that number again. $180,000. That doesn’t mean everyone earning less than $180,000 automatically qualifies. Credit, debt, occupancy, loan guidelines, education requirements and other eligibility criteria still matter. But it illustrates an important point: Down-payment assistance isn’t necessarily only for very low-income households. And assistance isn’t always free money.

Some programs are structured as second mortgages. Some defer repayment. Some have interest. Others have specific geographic or borrower requirements. That’s why it’s worth speaking with a lender who actually understands the available programs rather than assuming you won’t qualify.

Your First Home Doesn’t Have to Look Like Your Parents’ First Home

Another thing may need to change: Our expectations.

Maybe your first purchase isn’t a four-bedroom detached home with a large yard. Maybe it’s a condo. A townhome. A smaller house. A home farther from the urban core. A duplex where you live in one unit and rent the other. A house with an ADU. A multigenerational purchase. Or simply a property that works for the next five years rather than the next 30.

There is nothing wrong with a starter home actually being a starter home. The objective isn’t to buy your dream home on your first purchase. It’s to make a financially responsible first move.

Maybe You Buy With Family

This is another place where the path is changing.

For generations, the assumption was that adulthood meant establishing a completely independent household. But high housing costs are forcing some families to reconsider that model. Parents and adult children may purchase together. Siblings may purchase together. A family may buy a home with an accessory dwelling unit so multiple generations can share the property while maintaining separate living spaces. That isn’t necessarily a failure to achieve independence.

For the right family, it can be a strategy. Of course, shared ownership creates important financial and legal considerations. Who owns what? Who contributes what? What happens when someone wants to sell? Those questions should be addressed with the appropriate legal, lending and tax professionals before purchasing.

But we shouldn’t dismiss a different path simply because it isn’t the path previous generations took.

Maybe You House Hack

Here’s another strategy that’s becoming more familiar to younger buyers.

You purchase a home and rent part of it.

That might mean:

A duplex.

A home with an ADU.

A roommate.

A property with another legally rentable living space.

The rental income can help offset the cost of homeownership. Again, there are financing, zoning, tax and landlord considerations to understand. But creative doesn’t have to mean irresponsible.

Sometimes it simply means recognizing that housing costs have changed and adjusting the strategy accordingly.

Maybe You Expand the Map

Western Washington makes this conversation especially interesting. Housing costs can vary dramatically within a relatively small geographic area. Bellevue isn’t Lynnwood. Lynnwood isn’t Everett. Everett isn’t Port Angeles. Port Angeles isn’t Hoquiam.

And within each of those markets, property type and neighborhood can dramatically change the price.

Sometimes buyers begin with:

“I need a three-bedroom single-family home in this exact neighborhood.”

Then they discover that what they really need is:

“A home that keeps my payment within this range, gives me enough space and still allows me to live the life I want.”

Those are very different searches.

Flexibility in location, property type or size can sometimes create opportunities that weren’t visible at the beginning.

But We Shouldn’t Pretend It’s Easy

This is important.

Telling younger buyers to “just stop buying coffee” isn’t useful. The affordability challenge is real. Harvard’s housing researchers found that the mortgage payment on a median-priced home more than doubled between 2020 and 2025.

For a typical first-time buyer scenario with a 3.5% down payment, their estimate increased from approximately $1,200 per month in 2020 to more than $2,500 by mid-2025. The estimated annual income needed to support that purchase rose from less than $70,000 to more than $130,000. That’s not something you solve by skipping a few dinners out. Today’s buyers are facing a genuinely different financial equation.

Acknowledging that isn’t pessimistic. It’s realistic.

What If You’re Not Ready Yet?

Then you’re not ready yet. And that’s okay.

Homeownership shouldn’t be pursued at the expense of your financial stability. Maybe your next step isn’t buying a house. Maybe it’s spending the next year: Improving your credit. Reducing debt. Building reserves. Learning about assistance programs. Talking with a lender. Understanding what payment you’re comfortable with. Exploring different communities. Or simply creating a realistic plan.

There is a big difference between:

“I can’t buy a house.”

and

“I’m not ready to buy a house yet.”

The second statement creates a path forward.

Start With Information, Not Zillow

One of the simplest things a potential buyer can do is talk to someone before deciding homeownership is impossible.

Talk with a knowledgeable lender.

Ask:

What would I qualify for today?

What would the payment actually be?

How much would I really need to bring to closing?

Are there down-payment assistance programs available to me?

Would improving my credit change my options?

Would paying off a particular debt make a difference?

What should I work on over the next six or twelve months?

You may discover you’re closer than you thought.

Or you may discover you’re two years away.

Both answers are useful.

Because now you have a plan instead of an assumption.

Maybe the American Dream Has Evolved

Perhaps this is the bigger conversation. For previous generations, the American Dream may have looked like:

A job.

A marriage.

A suburban house.

Two cars.

Children.

Retirement.

All happening in a fairly predictable order. Today’s life doesn’t necessarily work that way.

People marry later.

They have children later.

They change careers more often.

They work remotely.

They live with family longer.

They start businesses.

They move between cities.

They create households that look very different from those of previous generations. Why should the path to homeownership be the one thing that isn’t allowed to change?

The Dream Isn’t Dead. The Road Is Different.

I don’t think we should minimize how difficult housing affordability has become.

It is harder for many first-time buyers today. The numbers support that. But difficult and impossible aren’t the same thing. The path may involve a smaller first home. A townhome instead of a detached house. Down-payment assistance. An FHA, VA or USDA loan. Buying with family. House hacking. Moving a little farther out. Taking another year to prepare. Or working with professionals who can help you understand options you didn’t know existed.

The American Dream was never really about owning a particular style of house by a particular age. At its heart, it was about opportunity.

The opportunity to build something. To create stability. To improve your circumstances. And to leave yourself, and perhaps the generation after you, with more choices than you started with. That dream isn’t dead. But in today’s housing market, achieving it may require us to stop following an old roadmap and start looking for new routes.

This article is intended for general educational purposes and is not financial, lending, tax or legal advice. Mortgage and down-payment assistance programs have individual eligibility requirements and can change. Buyers should speak with qualified lending and other appropriate professionals about their individual circumstances.