The housing affordability problem

The National Association of Realtors, which certainly has no reason to be pessimistic about the housing market, recently described the current market as “starved for affordable inventory.” First-time homebuyers now make up only 21% of all buyers, a record low, and the average age of first-time buyers is now 40. Those who would normally be buying homes now aren’t because they can’t afford to. This is a basic fact that just about everyone agrees on, but there is little agreement about how to solve the problem. 

Proposing the 50-year mortgage is one of the Trump administration’s potential solutions to make houses more affordable. There is no disputing that a 50-year mortgage would do just that: assuming interest rates are the same, monthly payments on a 50-year mortgage would be about 12% less than with a 30-year mortgage. But that 12% savings does not come without some enormous costs.

The problems with a 50-year mortgage

50-year loans are riskier for banks and they would need to charge a higher interest rate in order to compensate for that extra risk. At best, a 50-year mortgage would have monthly payments of about 12% less than a 30-year mortgage. In reality, that difference will be significantly reduced due to a higher interest rate on a 50-year loan. We don’t know exactly what type of rates banks would offer on 50-year mortgages, but we can speculate based on the difference between 15-year and 30-year mortgages.

According to Mortgage News Daily, the average 30-year mortgage rate is 6.22% and the average 15-year rate is 5.78% as of December, 2025. If the average 50-year mortgage rate is 0.44% higher, like the 30-year rate compared to the 15-year rate, it would currently be 6.66%. At those rates, a 50-year mortgage payment would be just 6% less per month than a 30-year mortgage.

It is misleading to focus on the monthly payment as the total costs of a 50-year mortgage would be much higher than a 30-year. If someone finances $350,000 over 30-years at current interest rates, they would pay $773,348 over the life of their loan. If someone were to instead finance $350,000 over 50 years, at a rate 0.44% higher, they would pay $1,209,180 over the life of their loan. While they would pay 6% less per month, they would end up paying 56% more over the life of their loan, which in this example would be $435,832.

There’s another problem with 50-year mortgages: it’s likely most borrowers would die before their loan is paid off. The average age of first-time homebuyers is now 40, which would mean if they chose a 50-year mortgage they would be 90 years of age when their mortgage is paid off, assuming they never refinance. The average life expectancy in the US is 78.4 years. 

One of the big benefits of home ownership, as opposed to renting, is that one day your mortgage is paid off and you no longer make monthly payments to the bank. For most borrowers, 50-year mortgages would be more like long-term renting at a fixed price than home ownership.

So are 50-year mortgages a good idea?

If 50-year mortgages were the only option consumers have, they would be a pretty good deal for those looking for long-term housing. Your rent would not increase every year, you would build equity in your home, and there’s a small chance that one day you may even pay off your mortgage. In a world where 30-year mortgages exist, though, there’s not really a need for 50-year mortgages. The monthly cost would only be about 6% lower, assuming slightly higher interest rates over the longer term, and the total cost would be much higher (about 56% more over the life of the loan).

If that 6% monthly savings would make the difference in you being able to afford a home, there are much better options to save 6% with a traditional 30-year mortgage. Putting more money down is one way to do it. Housing prices have been stagnant over the last few years and are even down a bit from 2022, so waiting a few more years to save a larger downpayment may not hurt you as much as it has in prior years when housing prices rose significantly. If you’d rather not wait, you can always buy 6% less house. Needless to say, a house 6% cheaper won’t be significantly different. Maybe you’ll have 0.5 less bathrooms, live a little closer to a highway, or have a kitchen that’s a little outdated.

Unfortunately for many Americans, houses may not be affordable right now. We love to see politicians propose solutions to help Americans achieve their dream of owning a home, but 50-year mortgages may do more harm than good. If you are in the market for a home, check out our homebuying calculator to see how much home you can afford based on your income, down payment, and interest rate.

At the same time, the share of first-time homebuyers has decreased to a historic low of 24%, and the average age of those same first-time buyers has reached an all-time high of 38. There is one very simple explanation for the sharp increase in inventory and lack of first-time homebuyers: houses are too expensive for most buyers.

If you’re even remotely familiar with basic theories of economics, you know that, all else being equal, an increase in supply without an increase in demand will normally lead to a drop in prices. The housing market has been no exception, with prices dropping slowly but steadily since 2022.

Should you buy a home in 2025?

The rise in inventory and decrease in home prices is good news for those looking to purchase a home. Real estate is very location dependent, but broadly speaking, it is now more of a buyer’s market than it has been in over 5 years. If you are in the market to buy a home, you now have more options, more leverage to ask for concessions from the seller, and more room to negotiate on price. However, this doesn’t necessarily mean it is a good time for you to buy a home.

Housing inventory could continue to increase and home prices could continue to drop. If you are buying a home, you need to be prepared for that to be the case. Plan to own your home for at least 5 to 7 years to help protect yourself against any drops in price. Mortgage rates have been over 6% for the last several years now, so this shouldn’t come as a surprise, but don’t count on being able to refinance your mortgage at a lower rate anytime soon. When you purchase a home, you need to marry the house and the rate.

My wife and I purchased our first home last year. If we had to move tomorrow, I think we would have to sell our home for less than we bought it for. There are more homes for sale in our neighborhood than there were a year ago, and comparable homes priced similarly to ours aren’t selling. Is part of me disappointed our largest asset didn’t immediately skyrocket in value after purchasing? Sure. But we plan to be in this house at least another 10 years. We bought at a price we could afford. We don’t need the price to go up; if our home dropped in value by 30% tomorrow, we would still be very happy with our decision to buy this home.

I know when it comes to a net worth statement, homes are listed as assets. After purchasing ours, though, I don’t think “asset” is an appropriate term. The value of our home is in the utility, security, and happiness it provides, not the amount of money it is worth on paper. If or when you make the decision to buy a home, any appreciation in value should be viewed as a potential cherry on top, not a driving force of your decision to purchase.

It’s good practice to consider what would happen if everything went wrong after you purchased a home. If you can feel good about your answers to the questions below (from a previous article that you can check out here), there’s a good chance you can successfully purchase a home.

Will I be okay if my home is worth less in 5 years?

Home prices don’t drop often, but they typically take longer to recover than the stock market. If you are purchasing a home, you need to be prepared for the worst-case scenario of your home dropping in value. This usually means planning to stay in the home at least 5-7 years, or longer if you put down less than 20%, to ensure you are never in a situation where you are forced to sell when you are “underwater” on your home (owing more than the home is worth).

What if mortgage rates don’t drop anytime soon?

It is very difficult to predict the future of mortgage rates, and if you are purchasing a home, it should be a financially smart decision regardless of whether interest rates drop, go up, or stay steady. Would it be great if rates dropped significantly over the next few years and you could suddenly cut your mortgage payment by 50%? Absolutely. While that is a possibility, you should not count on being able to refinance anytime soon when buying a home. You should be able to afford your monthly mortgage payment on the day you buy (which means it should be no more than 25% of your gross income).

What if the home requires more repairs than I thought?

Certain major home expenses can be planned for, but many are unexpected and can be devastating if you aren’t prepared. What happens if you need to replace your HVAC unit in the first few months of buying a home? That happened to me. How soon will you need to replace your roof? What is your plan if major appliances fail? Make sure you are financially prepared for the unexpected before buying a home.

How stable is your household income?

Preparing for the unexpected means thinking about the possibility of uncomfortable events; what would happen if you or your spouse lost your job after buying a home? Do you have multiple sources of income in your household? How easy would it be for you or your spouse to find a new job with a comparable income?

Will the housing market crash?

I don’t have a crystal ball, so I can’t tell you for certain whether or not the housing market will “crash,” but there aren’t currently any signs of impending doom. Prices are dropping slowly, but are still much higher than they were pre-2020. Available inventory is increasing steadily, but is still slightly below what we would have considered “normal” before 2020.

Right now, mortgage rates and available inventory are the primary drivers of home prices. If mortgage rates stay steady and inventory continues to increase, I would expect prices to continue to decrease. If mortgage rates drop significantly, available inventory could decrease and prices could rise. There are other factors that could come into play, but aren’t currently having much impact. A recession and rise in unemployment could certainly have an impact on prices. Inflation is currently 2.4%, but an increase in the rate of inflation could also impact home prices.

If I were in the market to buy a home today, I think I would feel more excited and optimistic than at any point since 2022. Mortgage rates are higher than you’d like them to be, but the amount of homes currently available for sale and slight decrease in home prices over the last few years is encouraging news for anyone looking to buy a home.

Average 30-Year Fixed Mortgage Rates

These higher interest rates were, as Brian would say, a bucket of cold water for the housing market. Residential real estate caught fire in 2020, as you can see from the chart below, and home prices didn’t really start coming down until interest rates started rising (which began in early 2022).

Home prices haven’t crashed, as some were predicting, but prices have remained stagnant and dropped slightly over the last 2+ years. Higher interest rates have kept many buyers on the sideline, and those who have bought are anxiously waiting for rates to drop so they can refinance their home at a more affordable rate. Potential homeowners want to know if now is the right time, or a good time, to buy, and those that bought homes since rates have increased want to know when they can refinance and get a break on their monthly mortgage payment.

Is it a good time to buy a home?

It is difficult to answer a question that is so personal. If you are someone that doesn’t have anything saved for a down payment and can’t afford a reasonable mortgage payment, it is probably a really bad time for you to buy. If you are on the opposite end of the spectrum and have a large down payment saved and can comfortably afford a mortgage payment at today’s interest rates, it might be a great time to buy. Instead of trying to time the market and buy at the “right time,” buy a home when it makes sense for you. Check out our ultimate guide to buying a home if you are thinking about buying a home or may be purchasing a home in the near future.

To ensure you can comfortably afford a home, ask yourself what would happen if everything went wrong for you. If you can feel good about your answers to the questions below, there’s a good chance you can successfully buy a home.

• Will I be okay if my home is worth less in 5 years?

Home prices don’t drop often, but they typically take longer to recover than the stock market. If you are purchasing a home, you need to be prepared for the worst case scenario of your home dropping in value. This usually means planning to stay in the home at least 5-7 years, or longer if you put down less than 20%, to ensure you are never in a situation where you are forced to sell when you are “underwater” on your home (owing more than the home is worth).

• What if mortgage rates don’t drop anytime soon?

It is very difficult to predict the future of mortgage rates, and if you are purchasing a home, it should be a financially smart decision regardless of whether interest rates drop, go up, or stay steady. Would it be great if rates dropped significantly over the next few years and you could suddenly cut your mortgage payment by 50%? Absolutely. While that is a possibility, you should not count on being able to refinance anytime soon when buying a home. You should be able to afford your monthly mortgage payment on the day you buy (which means it should be no more than 25% of your gross income).

• What if the home requires more repairs than I thought?

Certain major home expenses can be planned for, but many are unexpected and can be devastating if you aren’t prepared. What happens if you need to replace your HVAC unit in the first few months of buying a home? That happened to me. How soon will you need to replace your roof? What is your plan if major appliances fail? Make sure you are financially prepared for the unexpected before buying a home.

• How stable is your household income?

Preparing for the unexpected means thinking about the possibility of uncomfortable events; what would happen if you or your spouse lost your job after buying a home? Do you have multiple sources of income in your household? How easy would it be for you or your spouse to find a new job with a comparable income?

Thinking about how everything could go wrong when you buy a home isn’t fun, but it is a necessary evil to make sure you can truly afford your home and avoid potential financial disaster. It may be unlikely that home prices drop, it may be unlikely that mortgage rates stay high for a long period of time, you may not experience major issues with your home after purchasing it, and you might not experience a negative change in income. However, all of these events are very possible and should be seriously prepared for before purchasing a home.

When can I refinance my mortgage?

I can’t wait until the day I get a call from our mortgage broker, telling me how much he can save us if we refinance our home. Considering we have almost 30 years left on our mortgage, this call will probably come before we pay off our home – but when will it? In 2022 when mortgage rates first hit 7%, I did not think rates would still be around 7% over two years later. Rates could very well be lower in two years, they could very well be higher, and they could very well be about the same.

I made peace with the fact that we locked in a good rate for the time we bought and we will refinance our mortgage when it makes financial sense to do so. It would be incredible to suddenly save a pretty significant amount of money every month on our mortgage, but we made sure we bought a home we could afford at current interest rates. When you are evaluating the affordability of different homes, it is best to assume you won’t have the ability to refinance your home anytime soon.

Mortgage rates could be higher for longer than most people thought. That might affect your ability to buy a home or make your current home more affordable. It would be great if we had a crystal ball and could tell you, “Yes, buy a home that’s a bit out of your budget because you can refinance in May of 2026 at 2.75%. Also my crystal ball tells me you will never lose your job, your home won’t need any major repairs, and housing prices will keep going up.” It would be such an easy decision if that was the case! Until we are able to predict the future with 100% certainty, it is best to err on the side of caution and anticipate what could go wrong when buying a home. It is much better to be wrong about everything going wrong than to be wrong about everything going right.

In this episode, we discuss if it’s ever a good idea to rent forever. Download our free Home Buying Checklist today!

Have questions about how to buy a home in this crazy market, ways to beat the system, and common mistakes home buyers make? Check out our Money Guy Guide to Buying a House!

1. I would definitely use a mortgage broker again.

A good mortgage broker may be able to get you much better rates than you would otherwise qualify for. The broker we used was phenomenal and scored us an interest rate about 0.50% lower than typical rates at the time (looking at rates, we essentially got the rate of a 15-year mortgage but for a 30-year mortgage). With mortgage rates higher than they’ve been in decades, it’s especially important to save money where you can and get as low of a rate as possible.

Working with our broker was a breeze; he is local and works for a small family-run business and I knew I could always pick up the phone and ask him any questions I had about the process. By using a broker, we essentially got the super-competitive rate of a large national bank, or even better, and the service of a local family-run business.

2. I’m glad we didn’t cut corners on the inspection.

I’ve heard before of home buyers purchasing homes and waiving the inspection (primarily during the housing frenzy that occurred between 2021-2023), but I never realized how crazy that was until we purchased our home. Our real estate agent recommended an awesome inspector who went above and beyond inspecting the property and alerting us to issues we didn’t know about. The inspection was so cheap compared to all the other costs associated with buying a home that I can’t imagine why someone would want to save money and skip the inspection (unless they are buying a new construction, potentially).

For reference, our home is 20 years old so it is definitely not ancient and falling apart. The inspector uncovered some minor and moderate issues with the house that helped us negotiate with the seller and, by being made aware of and fixing these issues now, so they did not become big headaches in the future.

3. I would never buy a home without an agent.

I will not judge you if you are experienced in buying houses and don’t want to use an agent, but as someone that had never been a part of a real estate transaction before, I am so glad we used an agent. Our agent was intimately familiar with the local market and was able to use that knowledge to help us get into an amazing home at an amazing price. I know for a fact we would be spending substantially more on a home if we had not found a great agent to help us along the way.

4. If I could do it differently, I wouldn’t get so attached to the first home I fell in love with.

When you find a home you really love, it can be difficult to move on if you don’t get the home. The home I first fell in love with sold to someone else, but we ended up finding an even better home, in the same neighborhood, for a better price. I would caution potential buyers about becoming laser-focused on one home. Your offer might not get accepted or issues could come up during the inspection that cause you to back out. It’s easy to imagine yourself in homes you really like, but always keep your options open until you are under contract on a house. Like most big issues in finance, our emotions can betray us so it is important to keep an open mind and to be well grounded in knowing what you are looking for based on a solid list of must and nice to haves.

5. No home is perfect, and you will have to make sacrifices.

Unless you can build the home of your dreams from the ground up, you will probably have to make sacrifices when buying your home. Our home? The roof is old, there are rats in the crawlspace (working on it), the HVAC will need to be replaced soon, the yard is very sloped and has drainage issues, and I could go on. But our home is in a great neighborhood, we love the layout and the amount of space, we have hardwood floors (this was mostly a big deal for me and not my wife; I just hate fake hardwood floors), the landscaping is beautiful, I have room for a vegetable garden, the appliances are modern and updated, and it’s setup to a great place to create blossoming memories for my family.

When you buy a home, you need to figure out what is most important to you and what you are willing to sacrifice on. Chances are you will have to make sacrifices, but that’s okay.

6. Interest rates may not go back to 2020 levels anytime soon (and home prices may never return to 2020 levels).

We are fortunate to have found a home we can afford, but this was still a tough pill to swallow. At interest rates four years ago, or at home prices four years ago, we could buy so much more home. It hurts to think about what could have been if we had bought a house back in 2020 – until I think about how unprepared we were to buy a house back then. We were both at different points in our careers, we didn’t have much saved for a house or retirement, and weren’t ready to buy a home by any measure.

We bought a home that fit in our budget at current rates. We could have stretched and bought more home, but we want a home we can afford now, not a home we can theoretically afford if interest rates drop by a certain amount.

7. I’m glad we didn’t wait until we were able to put 20% down.

Who are these people buying their first home with 20% down and what is their secret? With prices rising like they have, we would have had to make tremendous sacrifices even to consider purchasing a home if we had to put 20% down. If we wanted to buy anytime soon, saving for retirement would not be happening. If we wanted to save for retirement and put 20% down on a house, it could be years or longer before we could buy.

Putting less than 20% down on a home is riskier since you start with less equity and more expensive since you pay PMI. The alternative, though, is much worse for many first-time buyers. Prices could continue to climb and run away from you or you may only have margin to save for a home and nothing else.

Buying your first home is never easy, especially right now. If you are looking to buy soon or in the future, I hope my personal experience can make it a little bit easier when it’s time to buy.

Almost every financial person I listen to says buying a home is one of the best ways to build wealth. But for me, at least right now, renting is so much cheaper. Wouldn’t it be better to just rent and invest the difference?

Download our free Home Buying Checklist today!

Buying a home is likely the largest purchase you’ll ever make. With median home prices continuing to rise and mortgage rates fluctuating, it’s more important than ever to make sure you’re truly ready, both financially and practically, before diving into homeownership.

That’s where our Home Buying Checklist comes in.

Common Home Buying Questions We Answer:

• Am I ready to buy a house?
• How much money do I need saved to buy a house?
• Should I buy a house or keep renting?
• What’s a good downpayment for a house?
• Should my emergency fund change before buying a house?

What’s Inside the Home Buying Checklist:

This free downloadable resource walks you through important considerations to make a smart home purchase without derailing your financial future:

• Evaluate your time horizon – Learn an estimated timeframe compared to stock market trends
• Assess the “sizzle” of your location – Assess what factors indicate where you live
• Consider your family situation – Anticipate future housing needs and space
• Check your job security – Determine if your career stability supports your decision
• Calculate your down payment needs – Know the difference between first-time buyer standards and subsequent purchases

Download our Home Buying Checklist today and explore more practical tools and insights to equip you for your home buying journey.

Ready to dive deeper? Read Money Guy’s Ultimate Guide to Buying a House and use our How Much House Can You Afford Calculator to see what’s realistic based on your income and financial situation.