The REAL Reason Homes Are So Expensive — A Realtor’s Perspective on What’s Actually Driving the Housing Crisis

A recent podcast featuring the CEO of Rocket Mortgage (now vertically integrated after acquiring Redfin) and a partner from Andreessen Horowitz (a16z) sparked a familiar conversation: Why is housing so expensive—and how do we fix it?

After watching the full discussion, here’s a grounded breakdown of what’s accurate, what’s oversimplified, and what’s often missing from the conversation, especially when it comes to the Bay Area housing market.

Why the “Golden Age” of Affordable Housing Was Possible

The podcast references Levittown, one of the first mass-produced housing developments built after World War II. The comparison is important because it highlights why today’s housing challenges are fundamentally different.

Back then:

• Land was abundant

• Cities weren’t fully built out

• Regulations were minimal

• Construction could scale rapidly

This same model still exists today—but only in far-out markets like Tracy, Manteca, Hollister, or Brentwood. In core job centers like Palo Alto, Mountain View, or San Francisco, the simple reality is this:

There is no more land.

Supply and Demand Still Matters—But Land Is the Constraint

Yes, we don’t build enough homes. That’s true.

But saying “just build more” ignores a crucial fact: land is finite and two-dimensional. You cannot magically add millions of homes to the most desirable areas unless you:

• Build much taller

• Accept denser living

• Or move farther away from jobs

And not everyone wants to live in a condo or a high-rise, which creates a massive disconnect between what exists and what buyers want.

Asset Price Inflation: The Real Divide

One of the most important points made in the discussion is the difference between consumer inflation and asset price inflation.

• Wages typically rise ~3% per year

• Stocks historically compound ~8–10%

• Real estate benefits from leverage

This creates a two-tier system:

• People with assets (stocks, equity, inheritance) have seen housing become more affordable

• People paid purely in salary have seen housing become dramatically less affordable

In fact, when priced in Apple or Google stock, Bay Area housing has effectively become cheaper over the last 25 years—for asset owners.

Why Saving Alone No Longer Works

Trying to “save your way” into homeownership is increasingly unrealistic.

Example:

• $1M home

• 20% down = $200K invested

• 7% appreciation = $70K gain

That’s a 35% return on cash invested, thanks to leverage.

This is why buying earlier—even imperfectly—has historically mattered. While leverage has risks, over long holding periods, it has been one of the most powerful wealth-building tools available.

The Condo Paradox

One uncomfortable truth rarely discussed:

There are hundreds of condos under $500K across the Bay Area—especially in San Francisco.

From a pure numbers perspective:

• A $100K income can often qualify

• Financing exists

• Inventory is available

But many buyers don’t want condos. They want:

• Single-family homes

• More space

• A suburban lifestyle near job centers

This mismatch between desire and reality is a major contributor to today’s affordability frustration.

Is NIMBYism Really the Problem?

“Not In My Backyard” (NIMBY) resistance is often blamed for high housing costs—but the truth is more nuanced.

If zoning truly allowed meaningful density:

• Land values often increase, not decrease

• Owners are incentivized to sell and redevelop

• Resistance fades when redevelopment math works

Small zoning changes (like allowing fourplexes) often don’t pencil out. Real transformation only happens when land use changes significantly, such as converting office parks or commercial corridors into high-density housing.

Why Other Countries Build Faster

Countries like the UAE, China, and parts of Southeast Asia build housing rapidly because they:

• Expand labor supply aggressively

• Accept faster permitting

• Prioritize speed over process

The U.S. prioritizes labor protections, regulation, and community input—important values, but ones that slow construction and increase costs.

You can’t have both unlimited protections and rapid, cheap housing at scale. Something has to give.

The Starter Home Has Changed

Another overlooked shift is cultural expectation.

• 1950s starter home: ~985 sq ft

• Today’s “starter” home: ~2,500 sq ft

In suburban markets, larger homes make sense.
In core urban job centers, that expectation simply isn’t realistic anymore.

AI, Robotics, and the Myth of a Tech Fix

While AI and robotics may one day reduce construction costs, these solutions are far off and won’t meaningfully solve today’s housing crisis.

A more immediate solution?

• Labor access

• Immigration reform for skilled trades

• Faster permitting

These changes are politically difficult—but far more practical than waiting for construction robots to save the day.

Homeownership Isn’t for Everyone—and That’s Okay

Not everyone should buy:

• If you’re transient

• Unsure where you want to live

• Prioritizing flexibility and experiences

Renting can be the right choice.

But for those who want stability and long-term roots, homeownership remains one of the most powerful tools for building wealth, especially when approached strategically.

The Bottom Line

Homes are expensive because:

1. Land in desirable areas is limited

2. Assets have far outpaced wages

3. Supply can’t scale where demand is highest

4. Expectations haven’t adapted to density realities

5. Policy solutions are complex and political

There is no single fix—and no overnight solution.

But opportunities still exist today for buyers who understand the system, manage expectations, and build a long-term strategy.