Economic health is determined by many factors, but one of the most important by far is fixed household costs. The higher our fixed costs rise, the lower their standard of living becomes (for middle- and working-class families, at least. Fixed costs are expenditures on necessities that cannot be reduced or cut from the budget.
Families can adapt and sacrifice when prices increase in many areas. But we cannot avoid paying higher prices when inflation affects some categories:
- Rent or mortgage payments
- Car payments or transportation costs
- Gas and groceries
- Other loan repayments (student loans, credit cards)
- Childcare
- Electricity and other utilities
- Property taxes
The more these necessities cost, the less we can spend on anything else.
This illustrates an important point that many mainstream analysts consistently overlook: When prices go up, spending goes up, too – at least on these necessities.
Housing is, by far, the biggest expense most families face.
“The American dream” soaring out of reach
Housing is perhaps the single biggest drag on the average household (especially for the young).
Home ownership, otherwise known as “the American dream” thanks to the mortgage industry’s advertising campaigns, has never been farther out of reach.
In the past five years, housing costs have spiked so high that many people are paying 50% or more of their annual income (after taxes) just to have a roof over their head. You may remember the headlines, Average American Family Can No Longer Afford the Average American Home. The majority of families, 70% as of last summer, cannot afford a home. (No, 50-year mortgages are not the solution.)
What about renting? In 2024, nearly half of all American renters were considered “cost burdened,” paying over 30% of their total monthly wages to their landlord.
Subsequently, housing affordability has become a political hot potato. Whose fault is it? How did we get here?
More money doesn’t mean more affordability
Overall inflation in prices is primarily caused by currency devaluation and so-called “stimulus injections,” printing money to buy assets like government debt. The Federal Reserve has engaged in this brand of Keynesian intervention regularly since the credit crash of 2008. On top of that, the multi-trillion-dollar Covid “stimulus” packages may have been the straw that broke the camel’s back.
Creating currency doesn’t create wealth. In fact, creating currency simply devalues all other currency in circulation – and prices go up.
It’s simple supply and demand.
However, it’s a mistake to ignore the second half of that sentence. Increased demand, or a lack of supply (or both!) also send prices higher.
So what’s the state of housing supply?
Home and rental supply tightened to record lows in 2022-2023. This fueled double-digit rental cost increases as well as an explosion in mortgage costs. Competition for the remaining homes for sale triggered bidding wars among buyers in many regions, leading to average prices soaring.
How many households saw a 40% rise in their incomes over the last five years? Some, I hope, but I doubt very many…
This dynamic obviously creates a disastrous financial strain on most families.
Why did supply become so tight?
Some blame the Covid lockdowns. Or the “relocation panic.” I believe the approximately 10 million illegal immigrants the Biden administration allowed into the country are a major factor.
Coupled with numerous welfare subsidies and housing subsidies given to the migrants that declared amnesty? The result was a perfect battering ram that drove average Americans out of the housing market.
The good news is, there are signs that relief is on the way.
Lower demand means lower prices
There is constant partisan debate over whether President Trump’s immigration crackdown is legally or morally justified. It might not matter if the result is a return of affordable housing. If the average American citizen sees homes within their budgets and shrinking rent costs? I argue this is what voters will remember when elections roll around.
Yes, prices remain high, for now. Real estate prices have some unique constraints:
- Prices are sticky, especially for privately-owned homes. Sellers don’t cut prices instantly. Instead, transactions slow, inventory builds and only then prices adjust downward. (Rents move faster.)
- Location dependency. A national average hides the real story: some cities would see big vacancy spikes; many areas would see almost no difference.
- Vacancy absorbs part of the shock before prices fully reset. Landlords often prefer to have a few vacancies at higher prices vs. slashing rents immediately.
Home supply has improved compared to a couple years ago, likely due to mass deportations (and self deportations). Furthermore, the corporate homebuilders have begun focusing on smaller, affordable “starter” homes rather than McMansions.
The U.S. housing supply has increased by at least 10% in the past year alone. National rental vacancy has climbed from record lows of around 5% under Biden to 7.2% under Trump. Average rental costs have declined 1.4% in the past year. It’s a good start!
But it’s not enough.
Much of the improvement in the housing supply occurred in early to mid-2025, around the same time that encounters at the U.S. border plunged to record lows and millions of illegals self deported. ICE deportations continue, but at a slower pace. I expect this will also reflected in home availability and affordability.
A healthy national balance would require a 4.5-6 month market supply. Right now, we only have a 3.5 month supply. This means another 1.2 million homes need to go on the market.
It’s achievable, but only if deportations and homebuilding increase in the year ahead.
Supply side issues can be resolved through new construction, but many such projects will take years to come to fruition. Furthermore, building costs are still high, and new homes will be priced accordingly.
No economy, not even the U.S. economy, is capable of absorbing tens of millions of migrants without severe consequences to our living standards.
This is the reason why illegal immigration and border security was a number one issue in the 2024 election (right next to the economy and inflation). It’s also the reason why the majority of citizens continue to support deportations for all illegal immigrants in every major poll and survey.
The left can wring their hands and shout “racism!” all they want. In my mind, this is a very simple economic issue that affects the 90% of American families who form the backbone of the country.
Ultimately, the battle over deportations is about far more than immigration – numerous elements of the economy are at stake.
It’s part of the solution – but not the entire solution.
Demand is only part of the problem
Even if housing demand softens and inventory improves, one uncomfortable truth remains: The surge in home prices over the last five years didn’t happen in a vacuum.
It coincided with:
- The fastest expansion of the money supply in modern history
- Trillions in federal stimulus funding
- Years of artificially suppressed interest rates
- Massive purchases of government debt by the Federal Reserve
Immigration flows may influence local supply and demand. Deportations may ease pressure in certain cities. But neither changes the monetary foundation beneath the housing market.
Housing was simply one of the first places inflation showed up in dramatic fashion.
Gas and groceries followed.
And insurance.
Utilities came next.
Property taxes, too.
The cost of living exploded across the board. I hope you can see, the deeper issue isn’t just who lives in the house – it’s what our money buys.
Housing prices are just one symptom
We’ve focused our discussion on housing today – but it’s just one part of larger pattern.
When currency is expanded aggressively to fund deficits and stabilize the credit system, asset prices rise faster than wages. Over time, this erodes affordability and widens the wealth gap between those who own tangible assets and those who rely solely on paychecks and cash savings.
Policy debates – whether over immigration, construction, subsidies, or zoning – may affect housing at the margins. But monetary policy affects everything.
That’s why many Americans aren’t just watching housing trends. They’re asking a bigger question:
How do I diversify my savings with assets that historically hold value when purchasing power declines?
Physical precious metals have served that role for centuries – not as speculation, but as a form of diversification when economic uncertainty rises. When the federal government’s debt expansion continues. Gold and silver have always served as safe-haven assets for exactly times like these.
Housing markets rise and fall. Administrations come and go.
But the long-term purchasing power of our currency is not a partisan issue. It’s a structural challenge and, quite simply, there’s no easy way to fix it.
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