By Cole Adams

Homeownership—once a hallmark of the American dream—has drifted further and further out of reach for the average American. More than half of US renters believe they’ll never own a home, and 80 percent of Americans say homeownership is slipping out of reach. Meanwhile, the average age of a first-time buyer has jumped from 33 to 40in 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:

The supply of dollars and credit 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 percent increase in the total supply, and 99 percent 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 percent since the official tracking of home prices in 1963, while nominal home prices have increased 2,242 percent 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.

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 percent to 700 percent more for the bottom 50 percent than for the top 0.1 percent. 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:

This problem persists today. A new worker, entering the job market in 2009, saving at the same rate, would have accumulated only 45 percent 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:

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 percent 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 percent and bottoming in 2021 at 2.95 percent. Lower mortgage rates counteracted rising home prices by shrinking the interest component of mortgage payments, limiting the increase of monthly payments.

From 2020 to 2022, the US government oversaw the increase of the money supply from $15.4 trillion to $21.6 trillion, a 40 percent increase in under two years. This was highly inflationary and home prices in this same time range non-coincidentally increased 25 percent. 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 percent in 2021, to 5.8 percent in 2022, and averaging 6.8 percent 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 percent or a compounded annual growth rate of 1.18 percent. 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 percent 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:

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.

© Eurasia Review