Stop Counting on the House

Do you still think of your house as an investment? Most people do. I did too, for most of my career.

Here's the uncomfortable part. The data no longer backs that assumption the way it used to.

For three generations, American homeowners have treated the mortgage payment as something other than an expense. Pay it every month, the thinking goes, and you're really paying your future self: a nest egg, a bridge loan for a child's tuition, a comfortable retirement someday. Robert Shiller's long-run data on U.S. home prices tells a different story. In real, inflation-adjusted terms, home values were roughly flat from 1890 to 1997. For most of the twentieth century, a house was a place to live, not an engine of wealth.

What changed the story was one unusually good stretch: the late 1990s through 2022. Interest rates fell for two decades straight, and policy treated cheap credit like a permanent fixture of American life. That stretch is behind us now.

I don't think what comes next looks like 2008. There won't be foreclosure signs on every block. What's building instead, in my view, is slower and harder to see: a shift in what a house actually is, from a wealth-generating asset toward an expensive, high-maintenance place to live.

If that sounds unsettling, it should. Most of us were raised on the opposite story.

The math doesn't work the way it used to

The median American home now costs roughly five times median household income. Compare that to the early 1980s, when 18-plus percent mortgage rates (yes, 18 percent) were attached to homes priced at closer to three to three-and-a-half times income. That earlier generation could absorb a brutal rate because the loan itself was small, and rising wages chipped away at the debt over time.

Today's buyer faces something closer to the reverse: a mortgage rate that's spent much of the past two years in the 6 to 7 percent range, stacked on top of a purchase price already inflated by twenty years of cheap money.

The Federal Reserve Bank of Atlanta tracks this directly through its Home Ownership Affordability Monitor. As of late 2025, it put the income share needed to carry a median-priced home at roughly 45 to 47 percent nationally. Housing regulators have used 30 percent as the line for a "cost-burdened" household for decades.

In some fast-growing metro counties, the number runs higher still. In Williamson County outside Nashville, the Atlanta Fed found a median-income household would need to spend 55 percent of its income just to carry the median-priced home there.

The bills that don't show up in the mortgage payment

Owning a home has always meant upkeep. What's different now is how fast the costs outside the mortgage are climbing. Insurance, property taxes, and maintenance are all outpacing general inflation.

The Consumer Federation of America found that home insurance premiums rose 24 percent nationally between 2021 and 2024, about twice the rate of inflation over that stretch.

The pain isn't spread evenly. That same report named Florida, Louisiana, Oklahoma, Kentucky, and Nebraska as the most expensive states to insure a home, with typical premiums now running well above $5,000 a year, and considerably more in the highest-risk counties. In Plaquemines Parish, near New Orleans, First Street Foundation documented flood insurance quotes climbing from around $800 a year to over $11,000 once future risk got priced in properly.

There's a newer variable behind all of this, and it's a big one. Climate risk has stopped being a regional curiosity and become something closer to a nationwide repricing event.

First Street Foundation estimates that 39 million American properties are significantly overvalued right now, because current insurance pricing hasn't caught up to the flood, wind, and wildfire risk those properties actually carry.

Insurers are closing that gap the way insurers always do: nonrenewal, exclusion, and in some states, leaving the market entirely. Public "insurer of last resort" programs are absorbing much of what's left.

That has a knock-on effect worth understanding. Local governments lean heavily on property taxes, and as they borrow to build seawalls, stormwater systems, and wildfire buffers, that debt service flows back to homeowners through rising assessments.

The very spending meant to protect home values can end up quietly eroding them instead.

An aging house, a shrinking crew to fix it

Here's a constraint that gets less attention than it deserves: labor.

The median age of an owner-occupied U.S. home hit 42 years in 2024, according to the Census Bureau, up from 31 years in 2005. Roofs, HVAC systems, and plumbing across a huge share of American homes are wearing out at roughly the same time.

Some of the trades doing that work depend heavily on immigrant labor. About 52 percent of roofers, and 57 to 61 percent of drywall and ceiling-tile installers, are foreign-born, according to the National Association of Home Builders.

Tighter immigration enforcement and falling net migration are squeezing exactly those trades right now, which helps explain why a full roof replacement commonly runs $9,000 to $18,000 nationally, and more for larger homes or premium materials.

Electricians and plumbers lean on immigrant labor less. Licensing requirements are the bigger bottleneck there. But they're just as hard to book right now, and mechanical system replacements routinely land in five figures too.

The old "1 percent rule" for home maintenance savings, set aside 1 percent of your home's value each year, doesn't cut it anymore. Bankrate's 2025 data put average annual maintenance spending closer to $8,800, nearly 2 percent of the median home's value.

That's a bill that never shows up on your closing documents.

Why prices haven't visibly cracked yet

If all of this is true, why hasn't the market already corrected?

Economists call it the lock-in effect. As of the most recent FHFA data, from the fourth quarter of 2025, just over half of all outstanding mortgages carry rates below 4 percent. Homeowners who'd otherwise sell are staying put instead, which starves the market of the inventory that would normally push prices down.

I think what we're looking at, much like the Volcker years, isn't a crash. It's more of a slow bleed: nominal prices holding roughly flat while inflation quietly erodes purchasing power underneath them.

If that pattern holds, there's no single dramatic headline to mark the loss. Just steadily less buying power built into the asset.

What a house actually is

Here's where I land on all of this.

Economists have long split a home into two separate assets: the land underneath it, which can genuinely appreciate because location is scarce, and the structure sitting on top of it, which behaves like any other durable good. It depreciates. It needs steady capital just to stand still.

For most of the postwar era, homeowners got to treat those two things as one. Rising land values did the heavy lifting, and cheap credit hid how much the structure itself was decaying underneath.

I don't think we get to make that assumption anymore.

The land under your house may still be doing exactly what it's always done. The house sitting on top of it is starting to look less like an investment and more like rent you pay yourself, with a maintenance bill stapled to the back.

For a lot of American families, I think that bill is finally coming due.