Homeownership has long been seen as a cornerstone of the American Dream because it reliably builds wealth. But new research suggests your chances of ever acquiring a home may depend partly on something beyond your control: your parents' wealth.

To examine the factors that influence what economists refer to as "wealth mobility," researchers from the U.S. Census Bureau and Carnegie Mellon University analyzed IRS tax records, Census data and property ownership records for 3.4 million families. 

The analysis then tracked the children born to those families — kids born between 1978 and 1986, or the youngest Gen Xers and youngest millennials — and whether they were able to buy a home between 2019 and 2021, when they were between 34 and 42 years old.

The bank of mom and dad

A key finding was that homeownership depends more on parental wealth than adult income, especially in expensive housing markets. Even people who significantly increase their income over their careers are less likely to own a home if their parents were renters than those with homeowner parents.

"Even if children grow up to earn about the same amount as adults, those with wealthier parents have higher homeownership rates and more valuable homes when they do own homes," Max Risch, one of the paper's co-authors and an economist at Carnegie Mellon University, told CBS News.

He added, "The opportunity to achieve this American dream is more dependent on how wealthy your parents are than we might like."

Economists have long focused on income mobility, including influential work by Harvard economist Raj Chetty, but wealth mobility has received less attention, Risch said. The new research suggests income mobility alone does not fully explain economic outcomes because wealth — which tends to persist across generations — shapes opportunities in ways earnings alone may not.

The meaning of opportunity

The researchers didn't examine why children of homeowners are more likely to become property owners themselves. But parents who own homes may have greater financial flexibility to help with down payments or provide other resources, Risch said.

The wealth gap between homeowners and renters is sizable. Homeowners had a median net worth of $396,000 in 2022, versus $10,400 for renters, according to the Federal Reserve's most recent Survey of Consumer Finances. 

Wealth can influence a family's ability to buy homes, pay for college or leave an inheritance. High income alone may not be enough, especially in expensive real estate markets, Risch said.

"When we think about opportunity, we should consider not only income and earnings, but the opportunity to purchase a home to build assets — maybe purchase the type of home that you wanted that gives you other opportunities to build wealth," he added.

Geographic tradeoffs

The study also looked at geographic differences in wealth mobility, finding that it's tougher for poor children to grow up to become homeowners in expensive U.S. regions, including parts of California and cities such as Boston, New York and Seattle. 

Wealth mobility is strongest in parts of the Midwest and Southeast, where home prices are lower and inventory is higher, the new study found.

The findings suggest a tradeoff facing many Americans: move to pricier cities with stronger job markets and higher wages, or remain in lower-cost regions where homeownership is more attainable but professional opportunities may be more limited.

"These are pretty hard trade-offs," Risch said. "It might mean you have to live in a place that wasn't necessarily the place that you want to live — you have to rent for longer than you would like — to continue access to that income."

The surge in housing prices since 2021, after the study period, suggests parental wealth may become even more important for homeownership, Risch said.

"House prices are growing faster than median incomes, and we find that when these house prices are increasing faster, it increases this intergenerational inequality of housing," he said. "It could get worse."