The Simple Truth About America's Housing Crisis:
I've Been Warning About This for Decades
As Trump considers declaring a national housing emergency, the data I've been tracking for 50+ years tells the real story.
When people ask me what's causing house prices to remain sky-high while most Americans can't afford to buy, I give them the same answer I've been giving for two decades: The banks did it.
NPR recently reported that U.S. house sales are down in volume, but prices are at the highest level ever. This shouldn't surprise anyone who's been following my work. According to Bank of International Settlements data, real house prices in America have risen 2.5 times since 1970.
Think about that: Baby boomers paid just 40% of what you're paying today for the exact same house, adjusted for inflation.
Why Mainstream Economics Keeps Missing This
The main factor that's made housing unaffordable in the United States—and most of the rest of the world—is too much mortgage lending by banks. This is a common phenomenon in any country that has deregulated its financial sector.
Gen Xers and millennials can't afford housing not because supply is inadequate (the excuse conventional economists and politicians love to peddle), but because banks have been allowed to lend too much money for housing.
Here's the mechanism most economists miss: The monetary demand for housing is fundamentally new mortgage debt.
Rich people can buy houses with cash, but anyone at normal income levels has to borrow money. When you divide that monetary demand by the average house price, you get how many physical houses can be purchased each year. That demand is extremely volatile because mortgage debt swings around like crazy.
But housing supply? It's fundamentally fixed. Houses aren't like ordinary goods where production can be ramped up by running factories at higher capacity. They take ages to build, and you can't build new land—the main thing you're paying for when you buy a house.
The Data That Proves It
This gets technical, but it's crucial: It's not the level of household debt that matters, or even its rate of change. It's the rate of change of its rate of change—the acceleration.
When I first developed this concept in 2006, I was honestly afraid the data wouldn't support such a complex relationship. Fortunately, researchers like Michael Beggs confirmed my theory in 2010, finding the same patterns not just in house prices but across economic activity.
The correlation is remarkable: When mortgage debt acceleration is positive, house prices rise. When that acceleration falls and turns negative, house prices fall. This relationship holds tight from 1970 right through to today.
It's Not Just America—It's Global
I've analyzed data from 15 countries going back to 1970, and the pattern appears everywhere that deregulated finance:
UK: House prices are 5 times higher than 1970 levels
Australia: Despite politicians claiming they avoided bubbles, they just kept "the foot on the accelerator" with programs like first-home buyer grants (which I call "first-home vendor grants")
United States: Actually ranks #7 globally—we're in the middle of the pack
Germany: The exception that proves the rule—minimal price increases because they didn't fully deregulate
Even Australia, which pats itself on the back for avoiding crashes, shows an even stronger correlation between mortgage debt acceleration and price bubbles than countries that actually crashed.
The Solution: Property Income Limited Leverage (PILL)
Instead of letting banks base lending on borrower income (which they routinely manipulate), we should limit lending to a multiple of the property's rental income—say, 10 times annual rental income.
This would end housing bubbles by:
Making lending based on actual economic value, not speculation
Preventing banks from pouring unlimited borrowed money into housing
Returning houses to what they should be: shelter, not speculative assets
The Wait Is Almost Over
I proposed this solution 20 years ago, knowing baby boomers in power would never implement it—they got rich riding the bubble banks created. My strategy was simple: wait for time to shift the political balance toward younger generations who see high housing prices as a burden, not a bonus.
In 1981, the average first-time homebuyer was 29 years old. Today, it's 38. My father was a bank manager who required 30% deposits, but with lower house prices, an average income earner could afford a suburban home when starting a family.
Now? Two working millennials with no children can barely scrape together a 5% deposit.
With Trump potentially declaring the first national housing emergency since 2008, the generational shift I've been waiting for may finally be here. One day soon, the average voter will be a non-homeowner who supports policies to bring house prices back within reach, rather than drive them ever higher.
That day must surely be approaching.
Want to see the complete analysis with all the charts and global comparisons? I break down 50+ years of data and explain exactly how mortgage debt acceleration predicts housing bubbles in my latest video: Watch here -
This isn't just economic theory—it's the data-driven explanation for why your generation pays 2.5 times what your parents did for the same house. The patterns I identified decades ago are playing out exactly as predicted.