Standard knowledge says we’re in a housing affordability disaster. With larger mortgage charges and better dwelling costs, shopping for a house has supposedly by no means been costlier. However what if I advised you this whole narrative is improper? In actuality, housing affordability might really be at or close to an all-time excessive.
Sound loopy? Possibly. But when housing have been really so unaffordable, why haven’t costs crashed? It might take a 38% decline in dwelling costs (might occur) or a 60% surge in family incomes (not taking place within the subsequent 5 years) simply to claw again to 2019 affordability ranges.
But, why do costs in lots of markets proceed to remain flat or march larger? Sure, the lock-in impact from pandemic-era refinancing performs a task. And sure, there’s a nationwide undersupply of houses. However these can’t be the solely explanations, particularly if affordability is as catastrophic as the information declare.
At Monetary Samurai, we’re monetary practitioners who join the dots by firsthand expertise. It’s solely attainable that politicians, economists, and actual property assume tanks have the idea of “housing affordability” fully backwards.
Earlier than you slam shut your laptop computer or chuck your cellphone in rage at my thesis, let’s dig in with an open thoughts. The targets of this publish are to reply why dwelling costs have not crashed but, why some markets proceed to inch larger, and whether or not we should always put money into actual property right this moment.
Housing Could Be Extra Inexpensive Than Everybody Realizes
The most recent options provided to decrease housing prices are: strain the Federal Reserve to chop charges (which doesn’t even management mortgage charges), push for 50-year mortgages to decrease month-to-month funds, or create extra incentives to construct new housing. Long run, sure, rising provide is one of the best ways to decrease rents and residential costs.
The factor is, possibly none of those recommendations are needed. What if, due to huge inventory market features and quickly appreciating personal firm fairness, housing affordability is definitely larger right this moment than ever?
In the event you study the place most wealth has been created since 2020, not to mention 2012, the reply turns into fairly apparent: a bull market in equities has massively outpaced the rise in dwelling costs, thereby rising housing affordability for individuals who take part in wealth-building belongings.
Why A Bull Market In Shares Makes Housing Extra Inexpensive
The #1 factor anti-homeownership advocates say is that it’s “cheaper to lease than personal.” The argument goes: renters can save and make investments the distinction, and in the event that they merely invested diligently within the S&P 500, they’d be wealthier.
Although I consider the common American can construct extra wealth in actual property than investing of their 401(ok), let’s take the “save and make investments the distinction” mantra to coronary heart.
From January 1, 2020 by December 1, 2025, the S&P 500 is up roughly 115% together with dividends. Over the identical interval, the median U.S. dwelling worth solely elevated by ~50%, rising from ~$267,000 to ~$410,000.
In case your inventory investments double whereas dwelling costs go up solely half as a lot, housing has really turn into extra reasonably priced utilizing the identical quantity of invested capital. Over the previous decade, shares have crushed housing by roughly 65 proportion factors.
This comparability assumes you invested an quantity equal to a house’s buy worth into shares. However since most first-time homebuyers solely put down 20% or much less, rising inventory market wealth has made it even simpler to afford a house. In any case, we’re assuming that renters are diligently saving and investing the distinction.
Let me provide you with three real-life examples.
Instance #1: A Home Grew to become Inexpensive Solely When Shares Rebounded
In 2022, I wished to purchase my home however couldn’t afford the asking worth. I wished to pay all money as a result of I used to be bored with having a mortgage, charges have been excessive, and I might get a greater deal. The S&P 500 fell about 18%, and since my portfolio was tech-heavy, I used to be down nearer to 26%. Ouch. Greater volatility is the value you pay for investing in development shares.
Then shares rebounded sharply in 2023, and the home got here again available on the market at a lower cost.
The mix of larger inventory costs and a decrease home worth made the house reasonably priced. With out the inventory market rally, the home would have nonetheless remained out of attain.
Had we waited till late 2025, the home would’ve been much more reasonably priced for us from a stock-gain perspective, since equities rose one other ~60% between 2023 and 2025. However that assumes the house didn’t respect farther from its 2003 baseline (it did by 15% – 25%), and assumes it might nonetheless be obtainable (extremely unlikely given the rarity of the massive lot measurement at this worth level).
If shares did not go up since I left conventional work in 2012, I would not have been in a position to climb the property latter. I merely did not have a major and regular lively earnings stream to assist me provide you with bigger down funds.
Instance #2: My New Tenants Simply Obtained 3 Years Of “Free Lease” Because of Firm Inventory Appreciation
I lately discovered new tenants for my renovated 5-bedroom, 4-bathroom San Francisco dwelling. The earlier tenants, a household of 4, paid $9,200 monthly. Given robust demand for one more rental I’d leased earlier, I examined the market at $10,000 monthly.
It took about three weeks, however I discovered tenants who have been a pair, not a household. One works at a personal tech firm. The opposite works for probably the most fashionable AI corporations right this moment, which was valued at $185 billion in September 2025.
Based mostly on their base salaries alone, $10,000/month lease was lower than 20% of their gross earnings. So if solely a pair wished to lease a 5-bedroom home, then so be it. Paying lower than 30% of your gross earnings to lease or a mortgage is taken into account reasonably priced.
However right here’s the kicker: about 2.5 months after his firm’s $185B valuation, it raised $15 billion extra at a $350 billion valuation. Based mostly on his seniority, I estimate he acquired round $500,000 in fairness vesting over 4 years, which by now could be price nearer to $1 million.
If his $500,000 acquire in inventory worth interprets to roughly $360,000 after taxes, then:
His inventory appreciation alone might pay their lease for 36 months.
That’s three years of “free” dwelling in a reworked ocean-view dwelling in San Francisco, courtesy of his firm’s rising valuation.
If “free” isn’t housing affordability, what’s? In the event that they wish to purchase a house sooner or later, it might definitely be extra reasonably priced given their firm fairness is rising far sooner than the expansion fee of San Francisco dwelling costs.
The Lacking Variable: Inventory Good points in Housing Affordability Calculations
Economists and politicians speak endlessly in regards to the following variables for housing market affordability:
earnings
dwelling costs
lease costs
mortgage charges
property taxes
insurance coverage charges
However they ignore two large forces:
Private and non-private inventory features, which dramatically improve buying energy
The Financial institution of Mother & Dad, which offers down funds for a rising proportion of homebuyers
This text focuses on the primary, although we all know there are trillions of {dollars} set to be inherited from the Boomer era.
Instance #3: Google Gaining One other Trillion In Market Cap
Neglect about me and my tenants. Think about the roughly 35,000 Google staff within the Bay Space. Google inventory has surged by ~65% in 2025. If 30% of a typical tech employee’s compensation comes from fairness, then their complete comp successfully rose 20%.
A Googler making $280K wage + $120K inventory goes from:
$400K complete comp to -> $478K complete comp.
They really feel richer and so they are richer.
And their current unvested inventory grants, which could have been price $360,000 at the start of the 12 months, at the moment are price 65% extra to $594,000 as effectively. In reality, it was a Googler I used to be competing with to purchase my home again in 2022. However they finally backed out as a result of they did not wish to do the reverse commute.
Bay Space housing isn’t turning into reasonably priced as a result of costs are falling. It’s turning into extra reasonably priced as a result of the individuals who purchase the houses are getting wealthier far sooner than costs are rising.
The NASDAQ vs. San Francisco Housing
Now let’s neglect Google, and have a look at the NASDAQ. It’s up about 160% since January 1, 2020.
In the meantime, the everyday San Francisco house is up 15–40%, relying on worth level and property kind.
Meaning the everyday tech employee or NASDAQ investor additionally finds housing affordability rising, not reducing.
And bear in mind: most patrons don’t pay money.
A $1.5 million dwelling in 2020 that’s now price $2 million requires a down fee improve of solely:
$300,000 -> $400,000.
That additional $100,000 is well digestible for a family making $300,000 – $600,000 a 12 months and dwelling off $150,000 – $300,000 gross. They’re already saving over $100,000 in money a 12 months. So due to elevated affordability 5 years later, they may have a look at a $2.5 million home with a $500,000 down fee or better as an alternative.
Housing affordability isn’t just about mortgage charges. It’s about asset appreciation relative to housing appreciation.
Housing Affordability Continues To Improve As Shares Rise
Housing affordability is simply a disaster for individuals who do not personal appreciating belongings. Fortunately, for almost all of Individuals, the bull market has quietly made shopping for (or renting) a house simpler, not tougher.
After all, if shares fall into one other bear market like in 2022, housing affordability will decline. A mix of job losses, shrinking funding portfolios, and waning confidence would make housing much less reasonably priced. Nevertheless, these variables will naturally put downward strain on dwelling costs and slowly make them extra reasonably priced once more. It is a cycle, and as an investor, it is necessary to know what a part of the cycle you are in.
This chart completely illustrates my level from an buyers viewpoint. International REITs and business actual property are at traditionally low-cost valuation ranges in comparison with equities, which is why I am investing in business actual property right this moment.
The Answer to Enhancing Housing Affordability
The simplest long-term resolution to enhancing housing affordability for all is to broaden broad possession of American corporations by inventory possession.
The federal government ought to promote higher private finance training and supply stronger incentives for investing, each for adults and their youngsters. When children begin investing early, they naturally develop an possession mindset. They acquire pores and skin within the recreation and turn into extra motivated to work, save, and construct their future.
Clearly, we nonetheless have a protracted strategy to go to enhance housing affordability for everybody, not simply the 63% of Individuals who personal shares, or folks working in extremely paid professions. I’m doing my half by writing three posts every week and a weekly e-newsletter without spending a dime since July 2009. I additionally wrote my newest USA TODAY nationwide bestseller, Millionaire Milestones, to assist extra folks construct wealth. However there’s a lot extra we are able to all do.
The extra we develop our wealth by shares, the simpler it turns into to afford not only a dwelling, however every part else life throws our manner.
Readers, is the narrative a few housing affordability disaster improper? Do you assume housing has really turn into extra reasonably priced due to inventory market features over time? If all renters have been diligently saving and investing the distinction, how might the price of dwelling actually be worse given the bull market?
Make investments In Actual Property With out A Massive Down Cost
In the event you see the compelling relative worth in business actual property in comparison with equities, check out Fundrise, my most well-liked personal actual property funding platform. Fundrise focuses on buying and constructing residential and industrial properties in lower-cost, higher-yield markets throughout the nation. It’s a easy strategy to diversify past shares and faucet into institutional-quality actual property alternatives.
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