Standard knowledge says we’re in a housing affordability disaster. With larger mortgage charges and better house costs, shopping for a house has supposedly by no means been dearer. However what if I instructed you this whole narrative is perhaps mistaken? In actuality, housing affordability may 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 could take a 38% decline in house costs (may 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 larger? Sure, the lock-in impact from pandemic-era refinancing performs a task. 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 info declare.
At Monetary Samurai, we’re monetary practitioners who join the dots by way of firsthand expertise. It’s completely potential that politicians, economists, and actual property suppose tanks have the idea of “housing affordability” utterly backwards.
Housing Could Be Extra Inexpensive Than Everybody Realizes
With larger mortgage charges and better house costs, the same old options provided to decrease housing prices are: stress 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 recommendations are essential in any respect. What if, because of large 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 house costs, thereby growing housing affordability for many 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 hire 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 typical 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 at face worth.
From January 1, 2020 by way of 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 reasonably priced utilizing the identical quantity of invested capital. Over the previous decade, shares have crushed housing by roughly 65 share 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 wished to purchase my home however couldn’t afford the asking value. I wished to pay all money as a result of I used to be uninterested in having a mortgage, charges have 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 worth you pay for investing in progress shares.
Then shares rebounded sharply in 2023, and the home got here again available on the market at a cheaper price.
The mixture of larger inventory costs and a decrease home value 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 admire farther from its 2003 baseline (it did by maybe 15% – 25%), and assumes it could nonetheless be out there (extremely unlikely given the rarity of the massive lot measurement).
If shares did not go up since I left conventional work in 2012, I would not have been capable of climb the property latter. I merely did not have a big and regular lively earnings stream to assist me provide you with bigger down funds.
Instance #2: My New Tenants Simply Received 3 Years Of “Free Hire” Due to Firm Inventory
I just lately discovered new tenants for my renovated 5-bedroom, 4-bathroom San Francisco house. The earlier tenants, a household of 4, paid $9,200 per 30 days. Given stunning demand for one more rental I’d leased earlier, I examined the market at $10,000 per 30 days.
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 one of many hottest AI firms right this moment, which was valued at $185 billion in September 2025.
Based mostly on their base salaries alone, $10,000/month hire was lower than 20% of their gross earnings. Paying lower than 30% of your gross earnings to hire 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 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 may pay their hire for 36 months.
That’s three years of “free” dwelling in a 5-bedroom 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 could definitely be extra reasonably priced given their firm fairness is rising far sooner than the expansion charge of San Francisco house costs.
The Lacking Variable: Inventory Positive factors in Housing Affordability Calculations
Economists and politicians speak endlessly in regards to the following variables for inventory market affordability:
- earnings
- house costs
- hire costs
- mortgage charges
- property taxes
- insurance coverage charges
However they ignore two big forces:
- Private and non-private inventory features, which dramatically improve buying energy
- The Financial institution of Mother & Dad, which supplies down funds for a rising share of homebuyers
This text focuses on the primary, although 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 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 and so they are richer.
And their current unvested inventory grants, which could have been value $360,000 at first of the yr, at the moment are value 65% extra to $594,000 as properly.
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 value level and property kind.
Meaning the standard tech employee or NASDAQ investor additionally finds housing affordability growing, not lowering.
And bear in mind: most patrons don’t pay money.
A $2.5 million house in 2020 that’s now value $3 million requires a down cost 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 cost 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 Enhance As Shares Rise
The dominant narrative is that housing is unaffordable. However in the event 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 file bonuses.
- Dad and mom are more and more funding down funds.
- Roughly 63% of all People personal shares
Housing affordability is simply a disaster for many who do not personal appreciating belongings. Fortunately, for almost all of People, the bull market has quietly made shopping for (or renting) a house simpler, not tougher.
This chart completely illustrates my level from an traders perspective. World 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 Resolution to Bettering Housing Affordability
The simplest long-term answer to enhancing housing affordability for all is to broaden broad possession of American firms by way of 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 youngsters begin investing early, they naturally develop an possession mindset. They achieve pores and skin within the sport and change into 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 People who personal shares, or individuals working in extremely paid professions. I’m doing my half by writing three posts per week and a weekly publication free of charge 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 way of shares, the simpler it turns into to afford not only a house, however every thing else life throws our method.
Readers, is the narrative a few housing affordability disaster mistaken? Do you suppose housing has really change into extra reasonably priced because of inventory market features through the years? If all renters have been diligently saving and investing the distinction, how may the price of dwelling actually be worse given the bull market?
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