Economist Writing Every Day

As I have discussed in many previous blog posts, young people today have a lot more wealth than past generations at the same point in their life. But we also know that housing prices have increased dramatically in recent years, and that for most families their home is their largest source of wealth.

Does this imply that the increase in wealth young Americans have seen is primarily driven by increased housing prices? If so, this would paint a less optimistic picture of the wealth of young people today, since the value of your home that you usually can’t easily convert into other consumption.

If we look at the past 5 years (2019Q4 to 2024Q4), the total wealth US households under the age of 40 increased by $5 trillion, in nominal terms. That’s not adjusted for inflation, but we don’t need to do so because we can look at how much each asset class increased in nominal terms as well. The total value of assets for households under age 40 increased by $5.86 trillion.

Here’s how the various classes of assets have increased since 2019Q4:

• Real Estate: $2.1 trillion
• Financial Assets: $2.0 trillion
• Consumer Durables: $0.49 trillion
• Private Businesses: $0.47 trillion
• Other Assets: $0.78 trillion

While we can see that the increase in real estate values is the largest category of asset increase, it is roughly equal to the increase in financial assets (retirement accounts and other investments). And the increase in real estate assets was barely over 1/3 of the total increase in assets.

Here’s another way to think about it. If we take real estate out of the picture — subtracting the asset value but also removing the associated liabilities — total wealth for households under 40 still increased by $3.7 trillion, or a 50% increase after adjusting for CPI inflation over 5 years. That’s a pretty good overall return!

Housing does deserve special attention when comparing the growth of wealth over time. But it is not the only reason younger generations are doing better than the past.