Typical knowledge says we’re in a housing affordability disaster. With increased mortgage charges and better house costs, shopping for a house has supposedly by no means been costlier. However what if I advised you this whole narrative is fallacious? In actuality, housing affordability may really be at or close to an all-time excessive.
Sound loopy? Possibly. But when housing had been really so unaffordable, why haven’t costs crashed? It will take a 38% decline in house costs (may 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 increased? Sure, the lock-in impact from pandemic-era refinancing performs a job. 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 info declare.
At Monetary Samurai, we’re monetary practitioners who connect the dots by firsthand expertise. It’s completely potential that politicians, economists, and actual property assume tanks have the idea of “housing affordability” utterly 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.
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, growing provide is one of the best ways to decrease rents and residential costs.
The factor is, perhaps none of those options are essential. What if, because of huge inventory market good points and quickly appreciating private company equity, housing affordability is definitely increased at present than ever?
For those who 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 house costs, thereby growing housing affordability for many who take part in wealth-building property.
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.
Regardless that I imagine the common American can construct more wealth in real estate than investing in their 401(k), 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. house value solely elevated by ~50%, rising from ~$267,000 to ~$410,000.
In case your inventory investments double whereas house costs go up solely half as a lot, housing has really change into extra inexpensive utilizing the identical quantity of invested capital. Over the previous decade, shares have overwhelmed housing by roughly 65 proportion factors.
This comparability assumes you invested an quantity equal to a house’s buy value 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 Turned Inexpensive Solely When Shares Rebounded
In 2022, I needed to purchase my home however couldn’t afford the asking value. I needed to pay all cash as a result of I used to be bored with having a mortgage, charges had been excessive, and I may 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. Larger volatility is the value you pay for investing in growth stocks.
Then shares rebounded sharply in 2023, and the home got here again in the marketplace at a lower cost.
The mix of increased inventory costs and a decrease home value made the house inexpensive. 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 inexpensive 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 out there (extremely unlikely given the rarity of the big lot dimension at this value 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 big and regular energetic revenue stream to assist me provide you with bigger down funds.
Instance #2: My New Tenants Simply Bought 3 Years Of “Free Hire” Due to Firm Inventory Appreciation
I lately discovered new tenants for my renovated 5-bedroom, 4-bathroom San Francisco house. The earlier tenants, a household of 4, paid $9,200 monthly. Given sturdy demand for an additional rental I’d leased earlier, I examined the market at $10,000 monthly.
It took about three weeks, however I discovered tenants who had been a pair, not a household. One works at a non-public tech firm. The opposite works for one of many most popular AI companies today, which was valued at $185 billion in September 2025.
Primarily based on their base salaries alone, $10,000/month lease was lower than 20% of their gross revenue. So if solely a pair needed to lease a 5-bedroom home, then so be it. Paying lower than 30% of your gross revenue to lease or a mortgage is taken into account inexpensive.
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. Primarily based on his seniority, I estimate he obtained round $500,000 in fairness vesting over 4 years, which by now could be price nearer to $1 million.
If his $500,000 achieve in inventory worth interprets to roughly $360,000 after taxes, then:
His inventory appreciation alone may pay their lease for 36 months.
That’s three years of “free” residing in a transformed ocean-view house in San Francisco, courtesy of his firm’s rising valuation.
If “free” isn’t housing affordability, what’s? In the event that they need to purchase a house sooner or later, it might definitely be extra inexpensive given their firm fairness is rising far quicker than the expansion fee of San Francisco house costs.
The Lacking Variable: Inventory Positive factors in Housing Affordability Calculations
Economists and politicians speak endlessly concerning the following variables for housing market affordability:
- revenue
- house costs
- lease costs
- mortgage charges
- property taxes
- insurance coverage charges
However they ignore two enormous forces:
- Private and non-private inventory good points, which dramatically improve buying energy
- The Bank of Mom & Dad, which supplies down funds for a rising proportion of homebuyers
This text focuses on the primary, regardless that we all know there are trillions of {dollars} set to be inherited from the Boomer technology.
Instance #3: Google Gaining One other Trillion In Market Cap
Neglect about me and my tenants. Contemplate 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 whole comp successfully rose 20%.
A Googler making $280K wage + $120K inventory goes from:
$400K whole comp to -> $478K whole comp.
They really feel richer and so they are richer.
And their present unvested inventory grants, which could have been price $360,000 in the beginning of the yr, are actually price 65% extra to $594,000 as nicely. The truth is, it was a Googler I used to be competing with to purchase my home again in 2022. However they in the end backed out as a result of they did not need to do the reverse commute.
Bay Space housing isn’t turning into inexpensive as a result of costs are falling. It’s turning into extra inexpensive as a result of the individuals who purchase the houses are getting wealthier far quicker than costs are rising.
The NASDAQ vs. San Francisco Housing
Now let’s neglect Google, and take a look at the NASDAQ. It’s up about 160% since January 1, 2020.
In the meantime, the standard San Francisco house is up 15–40%, relying on value level and property sort.
Which means the standard tech employee or NASDAQ investor additionally finds housing affordability growing, not lowering.
And bear in mind: most consumers don’t pay money.
A $1.5 million house in 2020 that’s now price $2 million requires a down cost enhance of solely:
$300,000 -> $400,000.
That further $100,000 is definitely digestible for a family making $300,000 – $600,000 a yr and residing off $150,000 – $300,000 gross. They’re already saving over $100,000 in money a yr. So because of elevated affordability 5 years later, they might take a look at a $2.5 million home with a $500,000 down cost or better as a substitute.
Housing affordability is not only about mortgage charges. It’s about asset appreciation relative to housing appreciation.
Housing Affordability Continues To Improve As Shares Rise
Housing affordability is just a disaster for many who do not personal appreciating property. Fortunately, for almost all of Individuals, the bull market has quietly made shopping for (or renting) a house simpler, not more durable.
In fact, 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 inexpensive. Nevertheless, these variables will naturally put downward strain on house costs and slowly make them extra inexpensive once more. It is a cycle, and as an investor, it is essential to know what a part of the cycle you are in.
This chart completely illustrates my level from an buyers perspective. World REITs and industrial actual property are at traditionally low-cost valuation ranges in comparison with equities, which is why I am investing in commercial real estate at present.
The Answer to Bettering Housing Affordability
The simplest long-term answer to bettering housing affordability for all is to develop broad possession of American corporations by inventory possession.
The federal government ought to promote higher private finance schooling and provide stronger incentives for investing, each for adults and their kids. When children begin investing early, they naturally develop an possession mindset. They achieve pores and skin within the recreation and change into extra motivated to work, save, and construct their future.
Clearly, we nonetheless have a protracted method to go to enhance housing affordability for everybody, not simply the 63% of Individuals who personal shares, or individuals working in extremely paid professions. I’m doing my half by writing three posts every week and a weekly newsletter totally free since July 2009. I additionally wrote my newest USA TODAY nationwide bestseller, Millionaire Milestones, to assist extra individuals construct wealth. However there’s a lot extra we are able to all do.
The extra we develop our wealth by shares, the better it turns into to afford not only a house, however every part else life throws our method.
Readers, is the narrative a few housing affordability disaster fallacious? Do you assume housing has really change into extra inexpensive because of inventory market good points over time? If all renters had been diligently saving and investing the distinction, how may the price of residing actually be worse given the bull market?
Make investments In Actual Property With out A Massive Down Cost
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