A House: Home or a Retirement Strategy?

Why this matters.

Ideally a house can be both to some extent but there is tension between these two things. For some, housing is about affordability — a place to live, raise a family, and build stability. For others, it’s about wealth appreciation, leverage, and long-term financial gain. In a sensible world we place more weight on family, affordable neighborhoods, quality services and schools. Otherwise we would all be living in pods and buying Gold, Heirloom seeds, and Crypto.

What We’re Actually Experiencing Locally: House Inflation, Not Collapse.

The entire country is contingent on an interest rate-affected environment where the ability to afford a house is driven by the ability to afford the interest on a 30-year fixed mortgage. That aside, the biggest driver in our market now though is scarcity of inventory. There just are not enough houses on the market to satisfy demand, so this is driving inflation. But this inflation is very discerning – it is really seen in the desirable neighborhoods and locations where buyers are competing vigorously.

My client advice has always been: Your home is where you live. It should not be the cornerstone of your retirement strategy.

Housing is not immune to volatility. It is affected by interest rates, consumer confidence, global events, policy decisions, and market psychology — just like stocks, commodities, or any other asset class. Treating your primary residence as a guaranteed wealth engine is one of the biggest financial misconceptions Americans have been sold. A house is still a pretty stable asset class though. It’s tangible. Buying any house is not like getting NVIDA at 90 cents but nor is it like buying ENRON at $90 in August 2000. A house should be a home that can also be a decent store of value, or better, over the lifetime of ownership if it is in a thriving community.

Quick fixes!

Given the political pressure to find quick solutions for housing affordability, 50 year fixed rate mortgages have been floated. This sounds terrible to me. Our mortgage debt then is passed on to our kids? This would mean after 20 years only 11% of principal would be paid-down. The last time people in large numbers were buying properties they could not afford the only winners were the bankers. The other possibility floated is allowing a 401K to be used to pay down mortgages - - but this is basically making your house your retirement, potentially. This too needs to be carefully regulated as it could have awful downsides. I always feel retirement investments and homes should be kept well-separated.

Conclusion.

When public policy attempted to force both outcomes at once two decades ago, the consequences were catastrophic, exposing deep vulnerabilities across the entire financial system. Until this fundamental tension is acknowledged, the housing conversation will remain polarized. Today’s renewed enthusiasm for financial “innovation” in housing, particularly proposals that tap retirement accounts to assist with down payments, appears designed to satisfy affordability concerns without confronting the underlying imbalance. These measures raise alot of questions for me about long-term stability.

I am not suggesting that current conditions mirror the excesses that preceded the 2007–2009 collapse. However, I do question whether we are once again stretching the system in ways that could prove fragile over time.