Name: On The Money: Is the long housing boom over?
Uploaded: 2026-02-06T17:20:24.000Z
Duration: 5 min 4 s
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If you're under 40, you don't need me to tell you the price of housing can be ridiculous.

Adverbs of degree

House prices in the US have nearly doubled in the last decade.

The median age of a first time buyer is now 38.

So is property investment still as safe as houses?

I think the explosive growth in home values was a unique circumstance.

The Case Shiller Index has been collecting data for most US cities since at least 1988.

If you'd bought the median American house that year, it would have set you back just over $89,000.

That was about three times average income at the time.

If you'd bought that same average American house in 2025, it would have cost just over $414,000.

The average house price has gone from £57,000 in 1990 to 272,000 in that's seven and a half times average salary.

The rise is certainly the consequence of a very, very low mortgage rates and sort of, sort of basically the last 15 years the Fed funds rate's been close to zero and mortgage rates kept coming lower and lower and in the pandemic reached, you know, exorbitantly low levels.

So the abnormal rate environment was the last decade and lower mortgage rates increase your purchasing power with the income that you have.

And in a world where you have a shortage of supply of housing writ large that bids up the price.

JP Morgan predicted average US house prices won't rise at all in 2026.

We've really seen more of a period of tepid growth deceleration of what we've seen.

With the Case Shiller National Index up as of the latest November 2025 read at 1.4% for the year versus 3.7% where it was a year before.

Does that mean 2026 is the year you can finally buy?

The average American mortgage rate is around 6%.

That's double what it was just three years ago.

And most American mortgages are locked in for 30 years.

Most of the US housing stock is owned by baby boomers in Generation X.

And as we've pointed out, with the big increase in house prices, essentially they've gained big wealth gains in terms of all of that equity.

They're, they have Low mortgage rates, rate locked in, no incentive to participate in the market.

And so that sort of new first time homebuyer sort of showing up in the market said, hey, there's nothing here to buy because it's all owned by the older generations with no incentive to sell.

And that sort of has slowed everything down.

That's less of a problem in countries where homeowners need to refinance mortgages every few years anyway.

Like the uk, where Nationwide's data shows affordability for first time buyers has actually been getting better since 2022.

On average, There are about 400 homes for every thousand people.

And that ratio hasn't changed much since the 1980s.

It's very difficult in many places in this country to build.

Land use regulations and zoning regulations make it difficult.

So there are a lot of headwinds to more home building.

And if you really look historically back in the 1940s, we were building somewhere close to 50 housing units per thousand people.

With mortgage rates and borrowing rates significantly higher than where they were, it makes certain potential building projects less attractive than they would otherwise be.

But then also there's been a real shortage on the labor side where it's very tough to find contractors and people to actually work on these projects.

So that's going to really impact both new starts and also timelines of existing projects.

This is the problem with a lot of government policies aimed at helping first time buyers.

there aren't any more houses to buy and prices are pushed up.

Eventually everybody ages out of home ownership.

That may be happening later with baby boomers because they're healthier and wealthier than prior generations.

But eventually that happens and that stock does come to market.

So we do expect in the long run sort of more liquidity or more turnover in the housing market probably later in this decade or early in the next day.

It's unfortunate that you might have to wait if you're a first time homebuyer a little while for that to happen.

But if you're buying a house for the first time now, don't count on seeing its value explode like your parents did.

Again driven by where we started the conversation with such low rates for a long period of time.

Treat it less like an investment asset and more like a utility that gives you shelter with a benefit of wealth creation.