The share of Americans who are married and own a home by age 30 has shrunk from 52% in 1960 to just 12%, according to new data — in a shocking collapse that has the potential to affect the future net worth of these couples, as well as the long-term health of the housing market and the U.S. economy.
The data, based on an analysis of US Census Bureau data, highlights the dual impact of social shifts and a persistent housing shortage. The most recent analysis of Realtor.com® pegs the national housing shortage at 4.03 million homes, while other White House estimates place the shortage at 10 million.
And while the death of the love nest — the traditional first residence of newlyweds — may seem like little more than a change in lifestyle choices, economists say it marks a fundamental collapse of the traditional path to middle-class security.
Who is responsible for the death of the love nest?
It’s natural to want to point fingers when the data is so clear. But Hannah Jonessenior economic research analyst at Realtor.com, says it’s more complicated than any one factor.
Instead, Jones attributes the shift to two compound forces: adults marrying later and housing affordability dramatically worsening.
An overwhelming majority (75%) of 25- to 34-year-olds married in 1960; today it is only 38%. This change alone has significantly reduced the number of people who fit the traditional homebuyer profile, let alone who can afford to buy a home today.
On that second point, home prices have skyrocketed since the 1960s. Jones notes that the price of a typical home in the 1960s was about two to three times the average income. Today, that ratio has risen to about five times nationally.
The price-income ratio measures the relationship between housing costs and income and serves as an important indicator of accessibility to the housing market. For perspective, the median household income in 1960 was $5,600, according to the U.S. Census Bureauwhile the average cost of a home was just under $12,000 – a ratio of 2.14.
Today, the median household income is $84,000, but the median home price has reached $425,000 at a ratio of 5, as Jones notes. For the price-to-income ratio to return to 1960s levels without housing prices falling, the average household income would have to rise to almost $200,000.
As that ratio has increased, it has become structurally more difficult for all households to achieve homeownership. Jones adds that young households are particularly affected because they are often in the early stages of the earning cycle, have no existing home equity to draw on, and have a much longer window to save for a down payment.
How marriage affects savings
However, if there is one factor to blame, it is the price-to-income ratio, says Jones – as affordability pressures are often to blame for delaying marriage and family formation.
That dynamic, like America’s, has come under increasing scrutiny The fertility rate is at an all-time low– well below the replacement rate of 2.1 births per woman, to 1.57. This statistic fuels growing concerns that an aging population will strain social safety net programs like Social Security, because more people are aging in the system than there are young workers paying into it.
There is also mounting evidence (and associated concern) that the delayed introduction of younger households is a… generation of increasingly isolated individuals who are dating, living together and socializing less than ever – threatening to further shrink the pool of buyers who would fit the profile of a married homeowner at age 30.
While this may seem like a personal issue, marriage is one of the most powerful economic forces in America. A large body of research shows how marriage increases a couple’s wealth in the same way that owning a home does, which translates into higher tax revenue for the local and federal government.
The most immediate economic benefit of marriage is also the most obvious: When couples marry, they combine the power of two incomes while reducing the amount of resources they consume individually. In the long term, this increases their purchasing power, which can spread to different sectors of the economy.
“Married people more often buy a house together or make other investments than people who live together,” he explains Jay Zagorsky in his groundbreaking 2005 study: “The impact of marriage and divorce on wealth.”
In it, Zagorsky found that married people’s wealth increased by about 14% for each year they were married — a benefit that Jones says is becoming increasingly important in today’s housing market.
“The dual-income benefit of marriage is much more important now than it used to be,” she explains. With the current price-to-income ratio of 5 to 7, two incomes are more often a requirement to buy a house than a bonus.
“High student debt, higher interest rates and the tight savings window that comes with getting married at 28 to 30 instead of in your early 20s make these setbacks insurmountable for many,” she adds.
How homeownership affects wealth
Delaying home ownership entails high costs. Recent research from Realtor.com found that individuals who buy their first home at age 30 have 22.5% (or $119,000) higher net worth at age 50 than those who wait just 10 years to enter the housing market.
While this may seem like an individual problem, it has much larger consequences outside the household.
“The economic impact is significant, as homeownership is the primary means of building wealth for middle-class Americans,” Jones said.
By comparison, according to the Federal Reserve’s Survey of Consumer Finances, the net worth of homeowners is roughly 38 times greater than that of renters. Historically, this gap has consistently remained between 30 and 40 times wider.
“A generation reaching their 50s and 60s with significantly less home equity will have a reduced capacity to fund their retirement, fewer contributions to property and capital gains taxes, and a greater reliance on public assistance programs,” says Jones.
She adds that the potential pressure on social security is a slowly building risk. Since the cohort currently renting into their 30s will retire around 2055 to 2065, demand for federal pension and health care programs could exceed current projections if ownership rates do not recover.
While the demise of the love nest may seem trivial, it represents a fundamental shift in the American dream — one that could leave both a generation and the national economy on a much more fragile foundation.
