This factor may determine whether you ever build wealth. You have no control over it.

The American Dream has long been synonymous with homeownership, as it is seen as a reliable way to build wealth and secure one’s financial future. However, new research suggests that the ability to own a home may be influenced by a factor beyond one’s control: parental wealth.

A recent study conducted by researchers from the U.S. Census Bureau and Carnegie Mellon University delved into the concept of “wealth mobility” by analyzing IRS tax records, Census data, and property ownership records of 3.4 million families. The study focused on the children born to these families between 1978 and 1986, spanning the youngest Gen Xers and millennials, to determine their likelihood of becoming homeowners between the ages of 34 and 42.

One of the key findings of the study was that homeownership is more closely tied to parental wealth than adult income, especially in expensive housing markets. Even individuals who experience significant income growth throughout their careers are less likely to own a home if their parents were renters, compared to those whose parents were homeowners.

Max Risch, an economist at Carnegie Mellon University and co-author of the study, highlighted that the opportunity to achieve homeownership is heavily influenced by parental wealth. This indicates that wealth mobility plays a significant role in shaping economic outcomes, as wealth tends to persist across generations and provides opportunities that income alone may not.

The study did not explore the specific reasons why children of homeowners are more likely to become homeowners themselves. However, it is suggested that parents who own homes may have greater financial flexibility to assist with down payments or provide other resources to support their children’s homeownership aspirations.

The wealth disparity between homeowners and renters is stark, with homeowners having a median net worth of $396,000 in 2022, compared to just $10,400 for renters according to the Federal Reserve’s Survey of Consumer Finances. This wealth discrepancy can impact a family’s ability to purchase homes, fund education, or leave an inheritance, highlighting the importance of wealth in achieving financial stability.

The study also identified geographic disparities in wealth mobility, noting that it is more challenging for children from low-income families to become homeowners in expensive regions such as parts of California, Boston, New York, and Seattle. On the other hand, wealth mobility is stronger in lower-cost regions in the Midwest and Southeast where homeownership is more attainable.

As housing prices continue to rise, particularly after the study period, parental wealth may play an even more significant role in determining homeownership opportunities. The research suggests that as house prices outpace median incomes, intergenerational inequality in housing may worsen, emphasizing the importance of parental wealth in achieving the American Dream of homeownership.

In conclusion, the study highlights the critical role of parental wealth in shaping individuals’ ability to own homes and build wealth. As wealth mobility becomes increasingly important in determining economic outcomes, policymakers and individuals alike must consider the impact of parental wealth on opportunities for homeownership and financial security.