The Real Story Behind the Housing CRUSH

If you feel like housing is more expensive than it “should” be, you’re not imagining it. But the reasons are more subtle than you probably think — and they have little to do with any single economic villain, even though my real-estate friends and I are always looking for one in our discussions of local real-estate markets. It prompted me to dig into the data. Understanding the real drivers can help families make smarter financial decisions, even in markets that feel impossible.

Why Housing Feels Different Than Other Costs

Over the past 100 years, most essentials — food, clothing, appliances, energy — have become dramatically cheaper in terms of hours worked. Technology and productivity have crushed the cost of everyday life. Yet housing hasn’t followed the same trend. For many young and middle-income families, even a modest starter home costs far more relative to income than it did for prior generations.

Why? The answer isn’t about laziness, poor savings habits, or government conspiracy. It’s about structure, location, and expectations.

“Today’s families live better, but often own less.”

Bigger Houses, Thinner Balance Sheets

Consider this: your parents might have raised a family in a 1,000-square-foot ranch in the 1950s. Today, many 20–30-year-old middle-income families live in 2,500–3,500-square-foot homes. On paper, that seems like a huge improvement — and in terms of comfort and amenities, it is. But it comes with trade-offs:

• Higher mortgage payments

• Larger property taxes

• More maintenance costs

• Greater leverage and less liquidity

Boomers often benefitted from smaller, cheaper homes and decades of asset appreciation, which allowed them to accumulate wealth almost by accident. Younger generations are buying bigger homes earlier — often stretching their budgets and leaving less room for savings and investment.

The True Drivers of Housing Cost

The real culprit is land scarcity and regulation, not construction costs or interest rates alone. Key factors include:

1. Zoning restrictions – limits on density, minimum lot sizes, and building height keep supply artificially low.

2. Permitting and bureaucracy – long approval processes make new construction slow and expensive.

3. Location premium – people follow jobs, schools, and amenities; demand is concentrated in a few metros, pushing prices up.

Lower interest rates can make payments more manageable, but they don’t reduce the price of land in desirable areas. Deregulation helps only where demand exists, and even then, change is slow. Rebuilding cities like Detroit is a nice thought experiment, but without jobs, schools, and social infrastructure, people won’t move there just because houses are cheap.

What the Data Tells Us

• Median real income for younger generations is roughly flat compared to Boomers at the same age.

• Wealth accumulation is lower for Gen X and Millennials than it was for Boomers.

• Consumption quality is higher — bigger homes, more technology, more convenience — but financial resilience is thinner.

In short, people today live better but own less, at least in balance-sheet terms.

Practical Lessons for Families and Clients

For financial advisors and individuals navigating this landscape, the implications are clear:

1. Don’t over-leverage for size – buying a house larger than needed can crowd out savings and investment.

2. Think of location strategically – proximity to jobs, schools, and future resale value often matters more than square footage.

3. Prioritize liquid wealth – cash, stocks, and other investments can provide flexibility younger generations lacked.

4. Plan for a long horizon – even if home prices rise, leverage and liquidity determine how resilient your finances are.

5. Explore emerging metros – second-tier cities with growing job bases offer real opportunity for affordability without sacrificing lifestyle.

   
   

Bottom Line

Housing is no longer a simple generator of wealth for most families. The market has changed — bigger houses, higher expectations, concentrated demand, and regulatory barriers mean that living standards can improve while balance sheets shrink.

Understanding the structural drivers and making intentional, data-driven choices can make the difference between “living well but financially stressed” and “living well and building real wealth.”

The housing crush isn’t a mystery — it’s a coordination problem that affects all of us. But by approaching it thoughtfully, families can navigate it successfully, even if the perfect solution doesn’t exist.