Why Homes Feel so Unaffordable

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Homeownership, once a hallmark of the American Dream, has drifted further and further out of reach for the average American. More than half of U.S. renters believe they’ll never own a home, and 80% of Americans say homeownership is slipping out of reach. Meanwhile, the average age of a first-time buyer has jumped from 33 to 40 in just five years, and the average buyer overall has reached a record 59 years old. How did it get so bad, and why do homes feel so out of reach?

The answer to this question can be summarized by four simple but devastatingly sad points:

1. Home Price Inflation: Monetary debasement (the expansion of the U.S. money supply) has driven the cost of housing up. This has led to more houses and property being used as an investment, not shelter, as people look for places to protect their wealth across time.

2. Savings Erosion: Monetary debasement has simultaneously eroded one’s ability to save for a home. Wages have failed to keep pace with both home prices and monetary expansion, while cash savings lose purchasing power each year. For most households, saving enough to purchase a home outright has become nearly impossible.

3. Debt Dependency: This dynamic has forced households to rely on debt, primarily through long-term mortgage products such as the 30-year fixed-rate mortgage, to access housing.

4. Reversal in Rates: For four decades (1981-2021), falling mortgage rates have masked the extent of the affordability issue. Lower rates offset rising home prices and kept monthly payments manageable. But since 2022, that trend has reversed: mortgage rates have surged alongside record home prices, triggering a sharp collapse in affordability.

Step 1: Home Price Inflation

The supply of dollars in the United States has expanded continuously through Federal Reserve policy and government-sponsored credit creation. Since official tracking began in 1959, the total money supply has grown from $286 billion to $21.5 trillion at the end of 2024, a 7,409% increase in the total supply, and 99% wealth devaluation for anyone holding dollars over that time.

As a result, more dollars now compete for a limited number of houses and prime real estate. Despite major productivity gains in construction materials and methods, the price of housing has risen dramatically over time. The chart below illustrates this relationship, with the median home price (in red) closely tracking the growth of the money supply (in blue). This increase in monetary supply has masked real productivity increases in the development of homes, as real home prices (home price divided by the money supply) have dropped ~60% since the official tracking of home prices in 1963, while nominal home prices have increased 2242% instead.

This dynamic has shifted housing from purely a utility to a savings mechanism as investors and corporations rush to protect themselves from monetary debasement. In 2024, investors accounted for roughly one in four home purchases, underscoring how inflation-protection behavior has artificially fueled further demand, and in turn, higher prices.

Step 2: Savings Erosion

The constant monetary expansion and the resulting rise in nominal home prices disproportionately harms households that save primarily in cash. These families are overwhelmingly in the lower income brackets, where cash and cash-equivalent savings make up a far larger share of financial assets, roughly 300% to 700% more for the bottom 50% than for the top 0.1%. When savings sit in dollars rather than in equities, real estate, or other scarce assets, they lose purchasing power each year. For these households, buying a home becomes increasingly difficult not because they aren't saving, but because the value of what they save is continually eroding.

To illustrate this, consider the following example:

• Imagine Billy, who enters the workforce in 1971 earning the median salary: $8,439 per year. He saves 25% of his income, or about $2,100. His long-term goal is to buy a home. At that time, the average home cost $24,300, meaning Billy has saved about 9% of the amount needed.

• If prices were stable, Billy might expect to reach his target in roughly 11 years. But monetary expansion pushes home prices higher every year, while the value of Billy’s early savings declines in purchasing power.

• After those 11 years, the average home now costs $66,400. Billy’s original $2,100, earned and saved in 1971 dollars, can now buy only 3% of a home, a 66% decline in its purchasing power.

• Even after accounting for annual raises and steady saving, Billy has managed to accumulate only 59% of the cost of an average home after 11 years. He does not fully reach his goal until 2003, 32 years after he began saving, and at that point, the average home now costs $186,000, roughly 7.5× the 1971 price.

This problem persists today. A new worker entering the job market in 2009, saving at the same rate, would have accumulated only 45% of the cost of an average home after 14 years, despite earning more each year.

The full data set for the original example, inclusive of yearly salary, savings, home price, and progress toward a purchase, is provided below:

 Step 3: Debt Dependency

With home prices increasing, and savings unable to maintain purchasing power, a prospective home owner has two primary options to enter the home market. The first is to store wealth in non-cash assets that inflate alongside or appreciate beyond the growth of the money supply, such as the stock market or monetary alternatives like gold and bitcoin. This, however, offers no relief to prospective home owners who do not have excess wealth to invest, as they necessarily must store a higher percentage of their wealth in cash to cover expenses, and are thus unable to participate to the degree that wealthier individuals do.

The second is to take on debt, through a mortgage or similar loan, to purchase a home. This has been common, with non-cash purchases on new homes not falling below 90% since data started to be tracked in 1988. While mortgages ostensibly increase affordability by extending the range of payments, they can bestow unsustainable amounts of debt onto a homeowner.

Debt financing has been especially effective in increasing the affordability of a home because from 1981 until 2021, mortgage rates have been in perpetual decline, peaking in 1981 at 16.64% and bottoming in 2021 at 2.95%. Lower mortgage rates counteracted rising home prices by shrinking the interest component of mortgage payments, limiting the increase of monthly payments.

It is important to note that these instruments are not products of a free market. Fixed-rate mortgages exist largely because they are federally backstopped through purchases by quasi-government agencies such as Fannie Mae and Freddie Mac. Ironically, these programs have likely made housing less affordable. By expanding credit availability, they increased demand for homes and pushed prices higher. The result has been an ever-lengthening loan structure, with proposals for 50-year mortgages now emerging as an attempt to preserve affordability through extended leverage rather than lower prices.

Step 4: Reversal in Rates

From 2020 to 2022, the U.S. government oversaw the increase of the money supply from $15.4 trillion to $21.6 trillion, a 40% increase in under 2 years. This was highly inflationary and home prices in this same time range non-coincidentally increased 25%. This, coupled with a loss of income from COVID shutdowns, was enough to lead to an increase in unaffordability on its own. But in 2021, the 40-year decline in mortgage rates that had concealed the extent of increased home prices, broke. The Federal Reserve, in response to inflation it had sponsored, drastically increased their benchmark rate, leading 30-year mortgage rates to jump from 2.95% in 2021, to 5.8% in 2022, and averaging 6.8% from 2023-2025. The increase in home prices due to the expansion of the money supply, coupled with the break of a 40-year decline in mortgage rates created a massive increase in the cost of accessing a home in this debt-dependent market.

When assessing the cost of a home through the cost of a down payment plus the cumulative sum of payments across a 30-year term, we can see this trend clearly. In 1981, a down payment plus payments totaled $268,684 ($13,360 Down + $8,956 Yearly). In 2021, when mortgage rates bottomed, this total was $428,719 ($71,000 Down + $14,291 Yearly). This represents an increase in that 40-year time frame of 60%, or a compounded annual growth rate of 1.18%. From 2021 to 2023, the cost increased to a total of $806,021 ($85,800 Down + $26,867 Yearly), an increase of a staggering 88% in two years. In other words, the total cost of a home using a 30-year mortgage increased nearly 1.5x more in two years, than it did the previous 40.

This has not subsided; at the start of 2025, this total cost remains at $782,945. The below chart illustrates this trend:

Conclusion:

Homes today feel so unaffordable because they are unaffordable. Staggering state-sponsored inflation that was no longer masked by declining mortgage rates has created an environment where those with locked in low-rate mortgages and assets that have inflated alongside home prices and the money supply are thriving, and those working for a salary and saving in cash are getting crushed. Inflation and the manipulation of interest rates have destroyed affordability, making it as ever, more important to protect oneself by saving in what another man cannot print for free.