Homeownership in the United States has long functioned as a wealth equalizer, allowing middle-class families to build wealth while they pay for their housing costs. Because houses have generally appreciated at rates that exceed inflation, housing is often an important source of wealth accumulation for low- and middle-income families, which are generally not invested in stocks or other financial investments. In fact, for the middle class (defined here as the middle quintile by income), home equity represents an average of 42 percent of all wealth held by the average family.

But this pillar of middle-class wealth creation is under threat. The Great Recession of 2007–2009 and the long, tepid recovery that followed it interrupted the standard lifecycle progression of rising homeownership by age for younger generations. The result is that current rates of homeownership are now lower than they were for older generations at comparable ages.

In this issue brief, we focus on families with middle-aged heads of households. These families have suffered a persistent decline in homeownership just as they are preparing for retirement, when owning a house provides an important source of financial security. These families are at risk, and policymakers should act to make homeownership more accessible to them and all Americans. Restructuring mortgages to take account of macroeconomic shocks and changing tax incentives for homeownership are two ways we can tackle the problem.

The consequences of this dramatic shift in homeownership for middle-aged families are serious. Just as these families are nearing retirement and should be actively preparing for it, many have lost their most important financial asset or find themselves unable to invest in a house for the first time. The upshot: Typical lifecycle wealth accumulation patterns are no longer working in their favor.

Read the full article about middle-age U.S. homeownership by Austin Clemens and John Sabelhaus at Equitable Growth.