Typical knowledge says we’re in a housing affordability disaster. With increased mortgage charges and better residence costs, shopping for a house has supposedly by no means been dearer. However what if I informed you this complete narrative is likely to be incorrect? In actuality, housing affordability might 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 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 increased? 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 info declare.
At Monetary Samurai, we’re monetary practitioners who join the dots by means of firsthand expertise. It’s fully doable that politicians, economists, and actual property suppose tanks have the idea of “housing affordability” fully backwards.
Housing Could Be Extra Inexpensive Than Everybody Realizes
With increased mortgage charges and better residence costs, the standard 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 simplest ways to decrease rents and residential costs.
The factor is, perhaps none of those recommendations are vital in any respect. What if, due to huge inventory market beneficial properties and quickly appreciating non-public firm fairness, housing affordability is definitely increased 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 residence 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.
Despite the fact that 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 at face worth.
From January 1, 2020 by means of 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 develop into extra inexpensive utilizing the identical quantity of invested capital. Over the previous decade, shares have overwhelmed housing by roughly 65 share 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 Turned Inexpensive Solely When Shares Rebounded
In 2022, I needed to purchase my home however couldn’t afford the asking worth. I needed to pay all money as a result of I used to be bored with 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. Increased volatility is the worth 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 mixture of increased inventory costs and a decrease home worth 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 admire farther from its 2003 baseline (it did by maybe 15% – 25%), and assumes it might nonetheless be accessible (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 lively 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
I not too long ago discovered new tenants for my renovated 5-bedroom, 4-bathroom San Francisco residence. The earlier tenants, a household of 4, paid $9,200 per thirty days. Given stunning demand for an additional rental I’d leased earlier, I examined the market at $10,000 per thirty days.
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 probably the most well-liked 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 revenue. 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. Based mostly on his seniority, I estimate he obtained round $500,000 in fairness vesting over 4 years, which by now’s 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 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 wish to purchase a house sooner or later, it might definitely be extra inexpensive given their firm fairness is rising far sooner than the expansion fee of San Francisco residence costs.
The Lacking Variable: Inventory Features in Housing Affordability Calculations
Economists and politicians speak endlessly concerning the following variables for inventory market affordability:
- revenue
- residence costs
- lease costs
- mortgage charges
- property taxes
- insurance coverage charges
However they ignore two enormous forces:
- Private and non-private inventory beneficial properties, which dramatically improve buying energy
- The Financial institution of Mother & Dad, which gives down funds for a rising share 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. Take into account the roughly 35,000 Google workers 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 present unvested inventory grants, which could have been price $360,000 at first of the yr, are actually price 65% extra to $594,000 as properly.
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 properties are getting wealthier far sooner than costs are rising.
The NASDAQ vs. San Francisco Housing
Now let’s overlook Google, and have 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 sort.
Meaning the standard tech employee or NASDAQ investor additionally finds housing affordability growing, not reducing.
And keep in mind: most consumers don’t pay money.
A $2.5 million residence in 2020 that’s now price $3 million requires a down fee improve of solely:
$500,000 -> $600,000.
That additional $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 due to elevated affordability 5 years later, they might have a look at a $3.5 million home with a $700,000 down fee or higher 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
The dominant narrative is that housing is unaffordable. However when you have 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.
- Dad and mom are more and more funding down funds.
- Roughly 63% of all Individuals personal shares
Housing affordability is barely 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 tougher.
This chart completely illustrates my level from an traders standpoint. World REITs and industrial actual property are at traditionally low cost valuation ranges in comparison with equities, which is why I am investing in industrial actual property right this moment.
The Resolution to Bettering Housing Affordability
The simplest long-term resolution to bettering housing affordability for all is to increase broad possession of American corporations by means 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 recreation and develop into extra motivated to work, save, and construct their future.
Clearly, we nonetheless have a protracted technique 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 publication at no cost 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 means of shares, the simpler it turns into to afford not only a residence, however the whole lot else life throws our means.
Readers, is the narrative a few housing affordability disaster incorrect? Do you suppose housing has really develop into extra inexpensive due to inventory market beneficial properties through the years? If all renters had 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 Large Down Fee
In the event you see the compelling relative worth in industrial actual property in comparison with equities, check out Fundrise, my most popular non-public 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 technique to diversify past shares and faucet into institutional-quality actual property alternatives.
With an funding minimal of solely $10, it is simple to dollar-cost common in and achieve publicity. Fundrise is a long-time sponsor of Monetary Samurai and Monetary Samurai is a a number of six-figure investor in Fundrise merchandise.
