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.

The average 30-year fixed mortgage rate reached a high last year that hasn’t been seen in over 20 years. Rates have moderated a bit and are now in the 6.5% range, but still remain much higher than what we’ve grown accustomed to since 2010.

If you locked in a mortgage rate of 7.5% last year, you’re probably feeling a lot more pressure to get that debt paid off early than someone who locked in a rate under 3% in 2021. While the rate of your mortgage is a big factor in whether or not you should prioritize it, it is not the only factor, and may not even be the deciding factor. Here’s what you should consider before deciding whether or not to prioritize paying off your mortgage.

Is your mortgage high-interest debt?

A rate of 6% or 7% on your home mortgage may feel high after experiencing over a decade of rates under 5%, but it isn’t out of the ordinary historically. During a period of high inflation in the 1980s, average mortgage rates peaked over 18%. Now that is high-interest mortgage debt. Current rates can’t really be considered high-interest debt, but they aren’t really low-interest debt, either. So where do they fit in the Financial Order of Operations?

Mortgage debt is unique because the underlying asset, your home, typically appreciates in value. This makes it less dangerous than auto debt or consumer debt. If your home has gone up in value, you can sell your home to pay off your mortgage. You can’t say the same thing about a car loan or credit card debt.

There may also be opportunities to lower, or effectively lower, your mortgage interest rate. Refinancing is the most straightforward way. If rates drop in the future, you can refinance your mortgage debt to a lower rate. If you don’t have the opportunity to refinance currently, it may make sense, depending on your tax situation, to itemize deductions and use the mortgage interest you paid throughout the year to save on taxes, lowering your effective rate.

We believe paying off mortgage debt fits into Step 9 of our Financial Order of Operations. Although rates have risen over the last several years, they have not yet reached the point where the debt should be treated like credit card debt or other high-interest debt. If a mortgage isn’t typically high-interest debt, and should be prioritized at Step 9 of the Financial Order of Operations, the next question you find yourself asking may be…

When should I pay off my mortgage?

Paying off your mortgage might not seem important at first glance since it is the last step in the Financial Order of Operations. There is a window in your life, though, when paying off your mortgage should be a priority. That window starts around age 45 or 50 and lasts until retirement. Why this particular time period? For younger folks, time is on your side. You have plenty of time to eventually pay off your mortgage, and having plenty of time means your wealth multiplier is extremely powerful. As you get older, you have less and less time to become debt-free before retirement and the money you invest isn’t quite as powerful as when you were younger.

This doesn’t mean the day you turn 45 you should log on to your mortgage company’s website and pay off the entire balance, but it would be a good idea to start strategizing about how you plan to become debt-free by retirement. You may already be on-track to be debt-free by retirement, which is great! If you still have work to do, it could make sense to increase your monthly payment or make extra payments to get rid of your debt by retirement.

If you are younger than 45 and happen to reach Step 9 of the Financial Order of Operations, you might be able to pay off your mortgage even earlier. For most folks, though, it should at least become something you plan for and think about around age 45 or 50 (or earlier if you plan to retire early).

Depending on how you think about debt, the benefits of paying off your mortgage could be purely financial or both financial and psychological. Some Financial Mutants aren’t bothered by the idea of carrying low-interest mortgage debt, and the benefit of paying it off is strictly financial. It’s easy to see why some think this way since it’s now common to earn more on a savings accounts than you owe in interest on your mortgage. For others, the thought of having such a significant amount of mortgage debt is anxiety-inducing and they will feel better mentally once their debt is gone, even if it is at a very low interest rate.

Both ways of thinking about debt are completely normal and there isn’t necessarily a benefit to thinking one way over the other (not that you can change the way you think, anyway). While there may not be a right or wrong way to think about mortgage debt, we believe everyone should aim to be completely debt-free by retirement and, if you are under age 45 and before Step 9 in the Financial Order of Operations, paying off that debt may be on the back burner.

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!

How the expectation for rate cuts have changed this year

In January, prediction markets expected 5 or 6 interest rate cuts this year, which would significantly reduce the Federal Reserve target interest rate. Now, the consensus has dropped to between 1 or 2 interest rate cuts this year.

It is still very possible the Federal Reserve does not cut interest rates at all this year. Chair Jerome Powell has long said the central bank needs to see more evidence that inflation is on its way down to the long-term target of 2%, and in recent months inflation has been moving in the wrong direction. Data for March shows the overall Consumer Price Index (CPI) coming in at 3.5% year-over-year, hotter than expected and well above the 2% target.

This change in expectations may be very frustrating to consumers and businesses looking for interest rates to drop so they can make large purchases, like a home, or expand their business. For anyone that understands how inflation works, the dramatic change in expectations shouldn’t be surprising at all. Here’s why forecasting inflation, and interest rates, is so difficult.

Why forecasting inflation is so difficult

The last period of high inflation our country experienced, before 2020, began in about 1972 and lasted until 1983. As you can see from the chart below, inflation did not rise and then subside. Inflation seemingly peaked in late 1974, then came back and actually peaked in 1980.

The federal funds rate also had several peaks, and topped 19% before declining (if you think mortgage rates in the 6% or 7% range are bad, try 19% or 20%).

I am not predicting we will see a resurgence in inflation like we did in the 1970s and 1980s. I am saying that the future of inflation is very difficult to predict, and it may have a lot to do with consumer expectations.

Inflation expectations can influence reality

Consumer expectations for inflation remain elevated. Consumers aren’t expecting high inflation, but they expect inflation to remain higher than the Federal Reserve target of 2% in the short-term (one year) and medium-term (five years). Just like actual inflation, expected inflation has stalled out around 3% and doesn’t appear to be budging. It should be no surprise that actual inflation and consumer expectations seem to mirror one another. If you expect prices to keep increasing, you may spend more now while prices are lower.

Consumer spending is still increasing very sharply month over month, which creates sort of an inflation loop. Consumers expect inflation to remain elevated, although not as high as several years ago, and keep spending money like there’s no tomorrow. Consumer spending fuels inflation, which in turn fuels the belief that inflation will remain elevated. See now why it isn’t so easy to predict the future of inflation?

How you can win financially regardless of inflation

Persistently high inflation and interest rates can be very frustrating for those trying to borrow money, but it is still very possible to build wealth and make smart financial decisions no matter what inflation or interest rates do. If you want to help protect your wealth from inflation, owning assets like stocks and real estate are some of the best ways to hedge against inflation. If you are looking to borrow a large amount of money and want interest rates to drop, consider only borrowing what you can afford now or waiting for rates to drop. Do not borrow money at a rate you can’t afford in the hopes that interest rates will drop in the near future and allow you to refinance.

We created several awesome tools on our website to help you think through some of these big life decisions. Check out our home-buying calculator to determine how much house you can afford based on your income and current interest rates. If you are looking to buy a car, give our car-buying calculator a go.

Nobody likes high inflation, and anyone taking out a mortgage now probably feels sick to their stomach that they are getting a rate in the 6s or 7s instead of the 2s or 3s of a few years ago. At The Money Guy Show, we strongly believe that you can build wealth and make smart financial decisions even in less than ideal periods of high inflation, and we are committed to giving you the tools to help you along the way.