People once believed if they worked hard, they could become homeowners, but 'we're coming to terms with the fact that perhaps most won't. And that's the new normal.'

When Katrina Linden moved into an apartment in her early 20s after graduating from college, she assumed renting would be temporary and eventually she'd own a home. But in the decade since, she's moved from rental to rental and lived with her parents.

After graduating from the University of Notre Dame in 2016, Linden moved to Sacramento, Calif., and started working. Interest rates at the time were relatively low. Buying a house felt like a realistic ambition if she could save enough money for a down payment.

Linden moved about seven times in nine years around the Sacramento area. A few times she moved to live with roommates to bring down the cost of renting. Some moves were driven by other considerations, like an apartment with a rat infestation. Regardless of where Linden lived, she found it challenging to save extra money after paying rent and bills on her modest salary working for a nonprofit.

"Each paycheck, at least half of it went to rent," Linden, 32, told MarketWatch. After all the other expenses, "you're left with a couple hundred dollars to play with. Sometimes that would cause me to be overdrawn if I wasn't expecting a specific bill."

Katrina Linden used to assume she'd eventually own a home, but recently that ambition has felt out of reach.

After nearly 10 years of feeling stretched, Linden decided to move in with her parents in Santa Ana, Calif. She wanted to be close to aging family members, catch up on bills and save for a home. But with mortgage rates currently above 6% and homes priced at elevated levels, Linden has now shifted her priorities, turning her savings energy toward goals like retirement.

Homeownership "doesn't feel, at this point in my life, like an achievable goal," Linden said. "It's never going to be achievable."

Today's young adults are renting for longer than ever. They are members of the renter generation, a group made up of Generation Z and millennials, including college-educated workers in their 30s and 40s who likely would have been homeowners in earlier decades. The median age of renters in America is now 42, up from 38 in 2006, and nearly one-third have a college degree or higher compared to 22% in 2010, according to Census data.

For an increasing number of Americans, renting has become a lasting financial reality, not a brief, transitional phase on the way to buying a home. Some who had once aspired to be homeowners now see it as out of reach.

The main obstacle is cost. The median home price is now five times the median household income, much higher than in the 1990s, when it was three times the median household income, according to the Harvard Joint Center for Housing Studies. At the same time, ongoing rent increases have made it difficult for renters to save up enough to afford a down payment.

While 48% of baby boomers were homeowners at age 30, that rate fell to one-third of 30-year-old millennials by 2024, according to an analysis of government data by rental platform Apartment List. Between 2000 and 2023, the homeownership rate for Americans in their 30s dropped by more than five percentage points, according to an analysis of Census data by the Council of Economic Advisers.

This longstanding trend is expected by Apartment List to continue for Gen Z. Only 29% of 18-to-34-year-olds who don't own a home expect to buy one in the next five years, according to Gallup, down from 57% in 2015.

Experts told MarketWatch that the reasons are structural and decades in the making: The 2008 financial downturn led to tightened underwriting standards, making it more difficult for young people to qualify for mortgages. As a result, builders pulled back from starter homes and other dwellings typically used for entry-level homeownership and prioritized building units for rent.

Housing prices ramped up during the pandemic and then interest rates rose, a double blow to prospective homebuyers. Outside of major affordability challenges, young adults are also forming families later than in previous generations, a milestone that historically has been associated with homeownership.

Surveys also show young, college-educated Americans are redefining their goals and choosing to rent to be closer to urban areas where jobs are available, or for flexibility while they finish schooling or make big career decisions. Developers have added high-end units to meet that demand, although they provide no relief to the average renter.

Because "overall it's harder to become a homeowner now than it was a few decades ago," thirty-somethings who have similar financial profiles to homeowners in previous generations are crowding an already tight rental market, which "is a factor in driving up rents," Alex Horowitz, project director at Pew Charitable Trusts, told MarketWatch.

This impedes renters' ability to save and build wealth, he said. "There's a huge wealth gap between owners and renters. When people are not able to get into homeownership, it just becomes harder for them to build assets."

These shifts are fueling a nascent political movement responding to the needs of long-term renters, with tenants across the country mobilizing to disrupt entrenched homeowner interests that have made it harder for the renter generation to afford buying a house.

Young Americans have few good housing options

Secilli Keeler wants to stop spending money on rent and instead invest in a house that she owns. But with the median home sale price topping $550,000 in Los Alamos, N.M., where she lives, buying a house isn't within reach. Keeler grew up in Los Alamos and she loves the town because it's safe and quirky. It's where she wants to build her life. She also enjoys working in the community as a special-education teacher and doesn't want to give that up.

"I have a master's degree but I can't afford to buy a house here," Keeler, 37, said. Her $1,900 monthly rent takes up about one-third of her roughly $71,000 in gross income and it's been difficult to save for a down payment or anything else between rent, utilities, car payments and other bills. "It's a comes-in and goes-out type of situation," Keeler, who is active in her local teacher's union, which involves negotiating for raises and better working conditions, said of her income.

Keeler is working on getting a promotion, which would boost her pay by about $10,000 a year, giving her the opportunity to save more. To get the raise she needs to take four master's-level classes, in addition to the master's degree in special education she already holds. In the meantime, she said her housing situation has made it difficult to plan her next steps in life. While she would love to own a home or live in a bigger rental before having kids, she knows she would struggle with the cost.

"I'm not saying I haven't started a family because of the monetary situation, but it's definitely been a factor," she said. "When you are paying all your money to a smaller place, you don't have the money or the space. Those things definitely make it difficult."

Nicollette Roe learned early on from her family, who had come to the U.S. from Samoa, that achieving the American dream meant education and homeownership. "This is what we came here to do," the 34-year-old told MarketWatch. Owning, however, did not turn out to be the blessing she expected.

Nicollette Roe's housing costs were unaffordable when she was a homeowner. Rent now consumes 40% of her gross income.

Roe, a first-generation college graduate, had one child in 2019. Her cousin, a realtor, helped her buy a $320,000, three-bedroom home in Tacoma, Wash. "Purchasing a house on my own felt really like a large milestone for me that I was really looking forward to," she said.

But her $2,490 monthly mortgage payment exceeded the $1,900 she'd been paying in rent. It consumed more than 50% of her pre-tax salary working at an education nonprofit. While her partner had recently started a screen-printing business, his income was inconsistent.

With no budget to buy furniture, "all I had was a bed and a tiny two-seater kitchen table," Roe recalled. Roe had a second child. During the three years they lived in the house, Roe gradually accumulated $50,000 in credit-card debt.

"I was crying to my mom one day about how I should feel accomplished - I got myself through college, I got a big-girl job and I'm a homeowner - but I don't feel like I'm winning the American dream," Roe said. "Why am I not thriving? And my mom was like, 'Oh, it's called house poor.'"

Roe sold the house in 2022 to pay off her debt and moved her family into a three-bedroom rental in an area she loves. She and her partner married and had a third child.

For a period, their housing costs were affordable with two incomes, but the rent kept rising, eventually surpassing $2,700. Then last year, the couple separated.

Rent now consumes 40% of Roe's $83,000 gross income, roughly the median household income in the U.S. She is far from alone in facing such a sizable housing burden: One in four renters spent more than half of their gross income on housing in 2024, according to data provided by the Harvard Joint Center for Housing Studies to MarketWatch.

For these households, "When their rent goes up, that takes a bite out of everything else," said Horowitz of the Pew Charitable Trusts. They might cut back on food or savings to compensate for a rent increase, or move farther away from their job to make the numbers work.

Despite the high expense, which gets in the way of saving, Roe wants to maintain a stable environment for her children and plans to stay in her rental for now.