The Petersen family’s two-bedroom apartment in northern California is starting to feel small.

Four-year-old Jerrik’s toy monster trucks are everywhere in the 1,100-square-foot unit in Campbell, just outside of San Jose. And it’s only a matter of time before 9-month-old Carolynn starts amassing more toys, adding to the disarray, says her mother, Jenn Petersen.

The 42-year-old chiropractor had hoped she and her husband, Steve, a 39-year-old dental hygienist, would have bought a house by now. But when they can afford a bigger place, it will have to be another rental. Petersen has done the math: With mortgage rates and home prices stubbornly high, there’s no way the couple, who make about $270,000 a year and pay about $2,500 in monthly rent, can afford a home anywhere in their area.

According to October data from the Federal Reserve Bank of Atlanta, a San Jose family with a median income of $156,700 would need to spend 80% of their income on housing — including an $8,600 monthly mortgage payment — to own a median-priced $1.54 million home. That’s far higher than the general rule of thumb that people should pay no more than 30% of their income on a mortgage or rent.

Moving out of state is out of the question for the Petersens — they have strong family ties to the area and their income would plummet if they move to a lower cost-of-living area. “I’m not willing to give up my job and close connections with my family for a house,” Petersen said.

The issue is widespread and near historic highs nationally: As of last fall, the median homeowner in the U.S. was paying 42% of their income on homeownership costs, according to the Atlanta Fed. Four years ago, that percentage was 28% and had not previously reached 38% since late 2007, just before the housing market crash.

“The American dream, as our parents knew it, doesn’t exist anymore,” Petersen said. “The whole idea that you get a house after you graduate college, get a steady job and get married? I’ve done most of those milestones. But the homeownership part? That just doesn’t fit financially.”

First-time homeowners are getting older

The same is true for an increasing number of American families.

In 2024, the median first-time homebuyer was 38 years old, a jump from age 35 the previous year, according to a recent report by the National Association of Realtors. That’s significantly above historic norms, when median first-time buyers hovered between 30 and 32 years old from 1993 to 2018.

The biggest driver of this trend, experts said, is simple: There are far too few houses on the market to match pent-up demand, driving prices past the point of affordability for many people who are relatively early in their careers. Coupled with high mortgage rates, many have concluded that renting is their only option.

“Wage growth hasn’t kept up with the increase in home prices and interest rates,” said Domonic Purviance, who studies housing at the Atlanta Fed. “Even though people are making more money, home prices are increasing at a faster rate.”

That gap has left many out of the housing market, which for generations has been a way for Americans to build equity and wealth that they can pass down or leverage to buy a larger home. It’s also led to widespread worries about housing in the U.S. About 7 in 10 voters under age 45 said they were “very” concerned about the cost of housing in their community, according to AP VoteCast, a survey of more than 120,000 voters in the 2024 election.

Is the dream of homeownership going to fade?

Brian McCabe, a sociology professor at Georgetown University, said he frequently tells his students that “there are few things that all Americans agree on, but one of them is that they’d rather own a home than rent.”

McCabe said homeownership, especially as a wealth-building tool, is the right move for many, especially if the owner intends to be in one place for a long time. But he also said many are realizing that not owning a home has its advantages, too — it gives people more flexibility to move and allows them to live in exciting neighborhoods they would not be able to afford to buy property in.

McCabe said millennials are getting married later, having children later, have a stronger desire to stay in cities and, especially due to remote work, value the flexibility of being able to move with ease — all of which he said could prompt an end to the notion that homeownership is the “apex of the American dream.”

“The big question is whether we see the sheen of homeownership start to fade,” McCabe said. “It’s such an interesting cultural marker: Why is owning a home the pinnacle for so many people?”

It’s a question Petersen wrestles with because she knows any three-bedroom home she found in her area would leave her family “house poor.”

“I used to subscribe to the idea that owning a house is just a natural milestone you have to reach,” she said. “At some point, though, what are you sacrificing by just owning a house and gaining equity? I want to be able to travel with my kids. I want to be able to sign them up for extracurriculars. How are we supposed to do that if we’re paying a mortgage that’s most of our take-home pay?”

Petersen said she’ll “always hold out a little bit of hope” that homeownership will be in her family’s future. But if they find a townhouse to rent that has space for her kids and fits within their $3,600 monthly rental budget?

“I’d take that,” she said.

Some cities are providing crucial aid to first-time homebuyers

Lifelong Boston resident Julieta Lopez, 63, spent decades hoping to buy a home but watched as prices became increasingly out of reach.

“The prices in Boston just got higher and higher and higher and higher,” said Lopez, who works for the city traffic department issuing tickets for parking violations.

Two years ago, furious to learn that her subsidized apartment’s monthly rent was being hiked to $2,900, Lopez, who earns about $60,000 annually, took out her phone and began searching for government programs that help first-time homebuyers. She was determined to finally own her own place.

Within months, she had succeeded. Lopez qualified to receive $50,000 from the local Massachusetts Affordable Homeownership Alliance nonprofit and another $50,000 from the city of Boston’s Office of Housing — funds that helped her with a down payment on the $430,000 two-bedroom condominium she shares with her 30-year-old son. She now pays about $2,160 a month on her mortgage.

Lopez knows she is lucky the city has placed such a focus on aiding first-time buyers like herself — Boston has poured more than $24 million into its homeownership assistance programs since Mayor Michelle Wu took office in 2021, helping nearly 700 residents get their first homes.

But Lopez also feels proud to have her own place after years of working so hard — jobs that included everything from telecommunications to health care to electronics.

“I was determined to have my piece of the pie,” she said. “I felt I deserved that. I’ve always worked. Always. Nonstop.”