August 18, 2025

Home Affordability is a popular topic of discussion among politicians, economists, and analysts. Usually, their commentaries reflect a mix of cautious optimism and deep concern. Some comments have a bearish or negative slant as reflected in a recent headline. "Affordability Crisis Worsens as Home Prices Hit 'Shocking' New High".The headline suggests that potential homeowners are being priced out of the housing market which leads them to propose policy initiatives to deal with the “affordability.” They point to the need for federal , state, and local governments policies aimed at making housing affordable. But not everyone is unhappy with the “affordability crisis.” The so-called shocking new home prices headline is music to the ears of existing homeowners. Assuming a fixed rate mortgage, if they have one, home appreciation means an increase in the homeowner net worth. And that is a good thing. To paraphrase Charles Dickens , the shockingly high home prices reflect a tale of two homeowners. The potential or marginal homeowner and the existing or average homeowner. Thus, the question becomes whether the government can design a policy that increases homeownership without reducing the wellbeing of existing homeowners of the overall economy. And will these policies result in an increase in the affordability index? Put another way how will an increase in the affordability index lead to an increase in homeownership and overall economic wellbeing of new homebuyers and existing homeowners? The tale of the two homeowners provides us with the answer.

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