SIf you’ve been following real estate news lately, you’ve probably seen the same headline over and over: “Housing has never been more expensive.”
That line grabs attention because it feels true. Prices are high, rates have jumped, and plenty of people feel locked out of homeownership.
But price and affordability are two different things, and affordability is what drives behavior.
While prices in real estate almost always rise, Americans have proven that they continue to buy homes. That’s because affordability isn’t about the price of the home – it’s about what buyers can comfortably spend.
See, price can’t be looked at in a vacuum. It must be analyzed relative to wages in order to understand affordability.
On last week’s Not Your Average Investor Show, we did just that – looking at the cost of shelter as a percentage of income. And we were pleasantly surprised at what we found.
The Numbers Tell a Different Story
We went back in time to 1982, one of the most challenging years on record for homebuyers.
Here’s how affordability looked then:
In 1982, families were spending 37% of their income on housing. When you look at the price of homes, wages, and interest rates at the time, it’s easy to see why. But if you only looked at price, you’d think people were crazy not to be buying!
In comparison, here’s how affordability looks today:
Fast forward to today and yes, homes are more expensive in dollars, and interest rates are higher than recent memory, but incomes have risen much faster than most people realize.
This means the average family is spending 28% of their income on a home bought today.
There are 2 key takeaways here:
- Although affordability challenges felt today are real, this isn’t the most unaffordable housing market in history.
- Housing affordability is largely driven by interest rates. Those can go down (or up) significantly in a short period of time and, therefore, housing affordability can change dramatically.
👉 Here’s a quick visual walk-through comparing 1982 and 2025 housing costs
1982 vs. 2025: Is Real Estate More Affordable Than You Think?
NOT YOUR AVERAGE INSIGHT: “High Price” Doesn’t Mean “Tapped Out”
In 1982, the numbers looked worse than they do now, yet real estate values grew for ten straight years. “Unaffordable” didn’t stop appreciation then, and it likely won’t stop it now.
Despite the challenges of affordability that we’re currently facing, rest assured that home values will also increase over the next 10 years.
👉 Watch how the “worst” housing market in 1982 turned into a decade of growth
When I started investing, I remember people saying there’s no way a home in Jacksonville will ever be worth $100k.
Fast forward to today…median home prices today in Jacksonville are around $350k and investors would jump at the chance to buy a property for $100k.
Some investors live with serious regret for not buying (or buying more) in 2012, 2018, or 2020.
Don’t let yourself be one of those investors because you think prices are too high. Remember that price isn’t the same as affordability, and unaffordability is temporary. Home prices will go up over time, and that’s where the real value lives for buy-and-hold investors.
Interested in seeing what affordability can look like in your portfolio? Schedule a no-commitment call with the team at JWB, and we’ll put together a personalized investing plan for you.