Housing, the Economy, and Your Financial Plan

 For most people, a home is their biggest asset, biggest expense, and biggest source of debt — all at the same time. That makes housing hard to ignore, even in a year dominated by geopolitical headlines and market volatility. And right now, with home prices still near all-time highs, it's worth stepping back and thinking about what that means for your financial plan.

Housing activity is mixed but prices remain near record levels

The housing picture over the past few years has been a study in contradictions.

For anyone trying to buy right now, the math is brutal. The 30-year fixed mortgage rate sits around 6.3% today. That's more than double the sub-3% rates buyers locked in during 2020 and 2021, and well above the 4.6% average we saw after 2008. Even with a solid down payment, the monthly cost of buying a home is meaningfully higher than it was just a few years ago.

That's also why so many current homeowners aren't selling. If you locked in a 2.75% rate in 2021, giving that up to buy something new at 6.3% is a tough pill to swallow. The result is that existing home inventory has stayed tight, which keeps prices elevated. We did see existing home sales fall 3.6% in March, giving back some of the gains from earlier this year.

Builders have stepped in to fill some of the gap, with housing starts running around 1.5 million units annually as of January. But new supply takes time to move the needle on prices. And even builders aren't feeling great about things right now. The NAHB homebuilder sentiment index dropped from 38 to 34 in April, and homebuilding stocks in the S&P 500 are basically flat on the year, up just 0.4%.

Here's what makes this interesting though: despite all of that activity softening, home prices are still near record highs. The Case-Shiller indices, which track prices nationally and across major cities, have climbed steadily. In recent history, we've only seen meaningful price declines twice: during the 2008 housing bust and the brief dip after inflation surged in 2022.

That matters for the broader economy. Because home prices have held up, most homeowners are sitting on healthy balance sheets. Combine that with low unemployment and strong wage growth, and you get a consumer that has kept spending even when sentiment has been lousy. Inflation stings. Job losses in sectors like tech have been real. But the housing wealth sitting behind millions of households has acted as a buffer that's kept the economy moving.

Housing is often the foundation of wealth across generations

The chart above tells an important story about why housing isn't just a real estate conversation — it's a financial planning conversation.

Real estate is a major piece of household net worth across every generation, but the weight of it shifts depending on where you are in life. Baby Boomers hold over $19.5 trillion in real estate, which is roughly 24% of their total net worth. For Gen X, that share climbs to about 34%. For Millennials, it's around 60%. The younger you are, the more your financial picture is dominated by your home — and the more of that home you still owe on.

This is what economists call the "wealth effect," and it matters a lot in moments like this one. When home values hold up, people feel more financially secure. That sense of security influences how they spend, even if they never touch their home equity through a HELOC or reverse mortgage. It's psychological as much as it is financial — and right now, with markets choppy and the headlines unsettling, that feeling of stability has been doing real work keeping consumer spending from falling off a cliff.

It also shapes how we think about your specific financial plan. Stock market volatility is uncomfortable, but depending on your situation, it may be less central to your financial picture than you think — especially if a significant share of your wealth is tied up in your home. For some clients, the more impactful conversation isn't about the market at all. It's about debt: whether paying down a mortgage faster makes more sense than stressing over short-term portfolio swings.

One more piece worth flagging: housing costs are the largest driver of the "shelter" category in the Consumer Price Index. That's not a small detail. Elevated home prices and rents have been one of the stubbornest reasons inflation has been slow to get back to the Fed's 2% target — even before energy prices started pushing headlines higher again.

Household debt levels reflect both mortgage and consumer borrowing

Housing is also the largest source of debt for most households — and that's worth taking seriously.

The accompanying chart breaks down household debt two ways: total debt including mortgages, and consumer debt without. Even as credit card balances and student loans have climbed, mortgage debt dwarfs everything else. It's not close.

The good news is that debt service levels, meaning what households are actually paying relative to their income, remain moderate by historical standards. Mortgage underwriting has also been much more disciplined since 2008, when household debt loads were genuinely dangerous. That's a meaningful difference from where we were heading into the last major housing downturn.

That said, for families who bought homes in the last few years at higher prices and higher rates, the monthly burden is real. It doesn't show up as a crisis in the data, but it shows up in budgets.

So where does this leave us? On the economic side, resilient home prices continue to support consumer balance sheets and keep the broader economy on steadier footing than the headlines might suggest. On the planning side, it's a reminder that the full financial picture matters. Stock market swings and geopolitical uncertainty get all the attention. But for most people, the decisions closest to home, how they manage their mortgage, their equity, and their debt, will have a far bigger impact on their long-term financial health than anything happening on Wall Street.

That's exactly the kind of conversation we're here to have.

The bottom line? The housing market isn't just an economic headline. For most people, it's the foundation of their financial life. Understanding that helps cut through the noise and keeps us focused on what actually matters for your long-term plan.

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