Standard knowledge says we’re in a housing affordability disaster. With greater mortgage charges and better residence costs, shopping for a house has supposedly by no means been dearer. However what if I instructed you this complete narrative may be mistaken? In actuality, housing affordability might really be at or close to an all-time excessive.
Sound loopy? Possibly. But when housing had been actually so unaffordable, why haven’t costs crashed? It will take a 38% decline in residence costs (might occur) or a 60% surge in family incomes (extremely unlikely) simply to claw again to 2019 affordability ranges. The widest hole in historical past.
But, why do costs in lots of markets proceed to remain flat or march greater? Sure, the lock-in impact from pandemic-era refinancing performs a job. And sure, there’s a nationwide undersupply of properties. 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 connect the dots by firsthand expertise. It’s totally potential that politicians, economists, and actual property suppose tanks have the idea of “housing affordability” fully backwards.
Housing Might Be Extra Reasonably priced Than Everybody Realizes
With greater mortgage charges and better residence costs, the standard options supplied 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 simplest ways to decrease rents and residential costs.
The factor is, perhaps none of those strategies are crucial in any respect. What if, because of huge inventory market beneficial properties and quickly appreciating private company equity, housing affordability is definitely greater right now 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 residence costs, thereby rising housing affordability for many who take part in wealth-building property.
Why A Bull Market In Shares Makes Housing Extra Reasonably priced
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.
Though I consider 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 at face worth.
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. residence worth solely elevated by ~50%, rising from ~$267,000 to ~$410,000.
In case your inventory investments double whereas residence costs go up solely half as a lot, housing has really turn out to be extra reasonably priced 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 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 spite of everything, 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 Reasonably priced Solely When Shares Rebounded
In 2022, I wished to purchase my home however couldn’t afford the asking worth. I wished to pay all cash as a result of I used to be uninterested in having a mortgage, charges had 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 growth stocks.
Then shares rebounded sharply in 2023, and the home got here again in the marketplace at a cheaper price.
The mixture of greater 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 maybe 15% – 25%), and assumes it could nonetheless be obtainable (extremely unlikely given the rarity of the big lot dimension).
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 energetic revenue stream to assist me give you bigger down funds.
Instance #2: My New Tenants Simply Bought 3 Years Of “Free Lease” Because of Firm Inventory
I lately discovered new tenants for my renovated 5-bedroom, 4-bathroom San Francisco residence. The earlier tenants, a household of 4, paid $9,200 monthly. Given shocking 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 had been a pair, not a household. One works at a personal tech firm. The opposite works for one of many most popular AI companies today, 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 revenue. Paying lower than 30% of your gross revenue 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 obtained round $500,000 in fairness vesting over 4 years, which by now’s value nearer to $1 million.
If his $500,000 achieve 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 5-bedroom ocean-view residence 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 could definitely be extra reasonably priced given their firm fairness is rising far sooner than the expansion charge of San Francisco residence costs.
The Lacking Variable: Inventory Positive aspects in Housing Affordability Calculations
Economists and politicians speak endlessly in regards to the following variables for inventory market affordability:
- revenue
- residence costs
- lease costs
- mortgage charges
- property taxes
- insurance coverage charges
However they ignore two big forces:
- Private and non-private inventory beneficial properties, which dramatically improve buying energy
- The Bank of Mom & Dad, which gives down funds for a rising proportion of homebuyers
This text focuses on the primary, despite the fact that 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
Overlook about me and my tenants. Think about the roughly 35,000 Google staff within the Bay Space. Google inventory has surged by greater than 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 they usually are richer.
And their present unvested inventory grants, which could have been value $360,000 originally of the yr, at the moment are value 65% extra to $594,000 as effectively.
Bay Space housing isn’t changing into reasonably priced as a result of costs are falling. It’s changing into extra reasonably priced as a result of the individuals who purchase the properties are getting wealthier far sooner 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 median San Francisco house is up 15–40%, relying on worth level and property kind.
Meaning the standard tech employee or NASDAQ investor additionally finds housing affordability rising, not reducing.
And bear in mind: most consumers don’t pay money.
A $2.5 million residence in 2020 that’s now value $3 million requires a down fee improve of solely:
$500,000 -> $600,000.
That further $100,000 is definitely digestible for a family making $400,000 – $600,000 a yr and dwelling off $180,000 – $300,000 gross. They’re already saving over $150,000 in money a yr. So because of elevated affordability 5 years later, they may take a look at a $3.5 million home with a $700,000 down fee or larger 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
The dominant narrative is that housing is unaffordable. However should you take a look at the place wealth has really been created since 2020, the truth flips:
- Shares have massively outperformed housing.
- Tech staff’ compensation packages have elevated partly as a result of their firm’s inventory has elevated
- Funding bankers are receiving document bonuses.
- Mother and father are more and more funding down funds.
- Roughly 63% of all Individuals personal shares
Housing affordability is simply 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.
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 commercial real estate right now.
The Resolution to Bettering Housing Affordability
The best long-term answer to enhancing housing affordability for all is to increase broad possession of American corporations by inventory possession.
The federal government ought to promote higher private finance training 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 sport and turn out to be extra motivated to work, save, and construct their future.
Clearly, we nonetheless have a protracted option 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 will all do.
The extra we develop our wealth by shares, the better it turns into to afford not only a residence, however every little thing else life throws our method.
Readers, is the narrative a few housing affordability disaster mistaken? Do you suppose housing has really turn out to be extra reasonably priced because of inventory market beneficial properties over time? If all renters had been diligently saving and investing the distinction, how might the price of dwelling actually be worse given the bull market?
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