What does it mean to be a “middle-class homeowner”?

That question is at the center of a recent report by AD Mortgage, which examines how home prices have outpaced wage gains over the past 60 years, effectively moving the goalposts for middle-class renters seeking the American dream of homeownership.

Pulling from government data, the AD report found that the median home price was $22,955 in the late 1960s while the median household income was $7,518, a roughly 3-to-1 ratio. In the early 2020s, the median home price had climbed to $397,920 — a more than 17-fold increase — but median household income saw just a tenfold increase to $75,445, equating to a home price-to-income ratio of 5.27.

“Today, homeownership is no longer automatically within reach, even for those with a middle-class income,” noted the report, which defines middle class as households with an income that falls between the 20th and 80th percentiles of U.S. income distribution.

An “interesting paradox” has developed since the late 1970s, according to the AD analysis, when typical mortgage rates were close to 10% but the typical downpayment represented about 72% of annual income. By the early 2020s, mortgage rates had dipped below 5% but downpayments had skyrocketed to about 105% of median income.

“What it means to be middle class in housing has changed since the 1970s, presenting regular folk with new challenges,” said AD Mortgage CEO Max Slyusarchuk in the report. “Our goal is to ensure these financial challenges don’t stand in the way by providing support, guidance and solutions that help households achieve their aspirations of homeownership.”

The silver ripple

A recent analysis by the National Association of Home Builders (NAHB) defines the “silver tsunami” as the “wave of housing inventory expected as older homeowners downsize or transition out of their homes.”

But that expected wave of baby boomers and Silent Generation members looking to downsize hasn’t resembled a tsunami so much as a gentle ripple.

Of the estimated 61.2 million people in the U.S. aged 65 years or older — or about 18% of the population, according to Census Bureau data — 78.6% of that demographic owns a home. That represents 34.1% of all owner-occupied housing units, per the NAHB analysis.

“As older Americans stay in their homes longer, the silver tsunami phenomenon won’t solve the housing shortage on its own,” noted NAHB Chairman Bill Owens. “Therefore, expanding the housing supply becomes more urgent, not less.”

The aging-in-place phenomenon helps explain why overall homeownership rates, which sat at 66% in the early 2020s, have hovered between 64% and 68% over the past six decades, according to the AD Mortgage report.

“This stability masks changes in the financial conditions for middle-class buyers,” the report stated. “Even though the share of homeowners stayed similar, the cost of entering the housing market, including higher home prices, larger loan amounts and increased upfront payments, has shifted.”

Put another way, the analysis concluded, “Stable ownership rates do not necessarily indicate unchanged access. Today, middle-class households face different financial considerations than in past decades, making the path to homeownership more dependent on income, loan structure and available resources.”