“Everything is amazing and nobody’s happy.” Louis C.K.
“Affordability” has become one of those political words that sounds meaningful until you stop and ask what it actually means. The media uses it. Politicians weaponize it. Entire narratives are built around it. Housing is unaffordable. Food is unaffordable. Healthcare is unaffordable. Life, apparently, is unaffordable.
Fine. But what is affordability? That question matters because affordability is almost always treated as a synonym for “prices went up,” which is a sloppy way to think about economics. Price is one thing. Affordability is another. Price tells you what something costs. Affordability tells you whether someone can bear that cost. Those two things are related, but they are not the same.
Much of the public conversation reduces the issue to inflation data. CPI has its place. It measures changes in the price level of a basket of goods and services over time. But it is an incomplete measure of affordability because it looks at only one side of the equation. It tells you what happened to prices, but not what happened to wages, assets, liabilities, or household balance sheets. And the actual data over the past year make that point rather nicely.
As of the latest annual readings, CPI rose 3.3%, the PCE price index rose 2.8%, and producer prices (PPI) rose 3.4%. In other words, prices increased. No argument there. But that still does not answer the affordability question. On the wage side, average hourly earnings for private workers rose 3.5% over the 12 months ending in March. That means nominal wages outpaced consumer prices. After adjusting for inflation, real wages were still up only about 0.1%, so workers were not exactly getting rich. But neither were real wages collapsing. The average worker, broadly speaking, was roughly treading water to slightly ahead.
Then there is household wealth, which the affordability conversation almost always ignores. According to the Federal Reserve’s Financial Accounts data, household and nonprofit net worth rose from roughly $161 trillion in the fourth quarter of 2024 to about $175 trillion in the fourth quarter of 2025. That is an increase of about $14 trillion, or 8.7% year over year. That is not a trivial detail. If consumer prices rose roughly 3%, nominal wages rose about 3.5%, and household net worth rose about 8.5%, then the usual political narrative becomes suspect at best. Yes, prices rose. But so did wages, modestly, and household balance sheets, in the aggregate, rose much more.
Of course, aggregate wealth is not evenly distributed. A retiree living on Social Security, a pension, or cash savings experiences rising prices very differently than a working household with wage income, home equity, and a brokerage account. A renter with few assets feels inflation differently than a homeowner with a fixed-rate mortgage and appreciating property. Someone on a fixed income with no meaningful asset exposure is more vulnerable to rising prices than someone whose income and assets can adjust upward. Which is precisely the point: there is no single affordability story because there is no single household balance sheet.
That is why broad political claims about “the affordability crisis” should be treated with suspicion. The phrase sounds authoritative, but it usually functions as a rhetorical shortcut rather than an analytical conclusion. It collapses many different household realities into one emotional talking point.
A more serious framework would begin with real wages, because nominal wages alone tell us very little. But wages alone are still too narrow. Households do not live on paychecks alone. They live on a mix of current income, accumulated savings, financial assets, home equity, debt obligations, and access to credit. That means affordability should be measured through some combination of real income and household wealth relative to the price level, with financing costs layered in where relevant. CPI by itself cannot do that. Consumer confidence surveys certainly cannot do that. Feelings are not facts, and sentiment is not purchasing power.
And that matters because economics, at least in public discourse, is too often treated as a branch of organized feeling rather than a discipline rooted in production, exchange, capital, and incentives. Consumer confidence reports get breathless coverage, as though the economy is whatever people tell pollsters they feel it is that week. But confidence is mood. Affordability is capacity. A consumer can feel gloomy because headlines are bad, because eggs cost more than they did three years ago, or because his preferred political tribe is out of power. None of that, by itself, tells you whether his real purchasing power actually declined.
The real question is not whether prices are up. Of course prices are up. In a fiat monetary system nominal prices tend to rise. The real question is whether the household’s capacity to absorb those prices has improved or deteriorated. Over the past year, prices rose by roughly 3%, nominal wages rose 3.5%, real wages were basically flat to slightly positive, and household net worth rose about 8.7%, far outpacing the increase in consumer prices. That does not yield a neat political narrative, but it does yield an honest one: rising prices are only half the affordability equation. The other half is the household’s financial capacity to bear them.
So the next time some politician, pundit, or media talking head declares that life is “unaffordable,” the proper response is not applause. It is a question: affordable for whom, relative to what, and measured how? Because price matters, yes. But affordability is not sticker shock. It is purchasing power. And if we want to discuss it honestly, we need to stop measuring feelings and start measuring financial capacity.
Mark Lazar, MBA
CERTIFIED FINANCIAL PLANNER™
“Everything is amazing and nobody’s happy.” Louis C.K.
“Affordability” has become one of those political words that sounds meaningful until you stop and ask what it actually means. The media uses it. Politicians weaponize it. Entire narratives are built around it. Housing is unaffordable. Food is unaffordable. Healthcare is unaffordable. Life, apparently, is unaffordable.
Fine. But what is affordability? That question matters because affordability is almost always treated as a synonym for “prices went up,” which is a sloppy way to think about economics. Price is one thing. Affordability is another. Price tells you what something costs. Affordability tells you whether someone can bear that cost. Those two things are related, but they are not the same.
Much of the public conversation reduces the issue to inflation data. CPI has its place. It measures changes in the price level of a basket of goods and services over time. But it is an incomplete measure of affordability because it looks at only one side of the equation. It tells you what happened to prices, but not what happened to wages, assets, liabilities, or household balance sheets. And the actual data over the past year make that point rather nicely.
As of the latest annual readings, CPI rose 3.3%, the PCE price index rose 2.8%, and producer prices (PPI) rose 3.4%. In other words, prices increased. No argument there. But that still does not answer the affordability question. On the wage side, average hourly earnings for private workers rose 3.5% over the 12 months ending in March. That means nominal wages outpaced consumer prices. After adjusting for inflation, real wages were still up only about 0.1%, so workers were not exactly getting rich. But neither were real wages collapsing. The average worker, broadly speaking, was roughly treading water to slightly ahead.
Then there is household wealth, which the affordability conversation almost always ignores. According to the Federal Reserve’s Financial Accounts data, household and nonprofit net worth rose from roughly $161 trillion in the fourth quarter of 2024 to about $175 trillion in the fourth quarter of 2025. That is an increase of about $14 trillion, or 8.7% year over year. That is not a trivial detail. If consumer prices rose roughly 3%, nominal wages rose about 3.5%, and household net worth rose about 8.5%, then the usual political narrative becomes suspect at best. Yes, prices rose. But so did wages, modestly, and household balance sheets, in the aggregate, rose much more.
Of course, aggregate wealth is not evenly distributed. A retiree living on Social Security, a pension, or cash savings experiences rising prices very differently than a working household with wage income, home equity, and a brokerage account. A renter with few assets feels inflation differently than a homeowner with a fixed-rate mortgage and appreciating property. Someone on a fixed income with no meaningful asset exposure is more vulnerable to rising prices than someone whose income and assets can adjust upward. Which is precisely the point: there is no single affordability story because there is no single household balance sheet.
That is why broad political claims about “the affordability crisis” should be treated with suspicion. The phrase sounds authoritative, but it usually functions as a rhetorical shortcut rather than an analytical conclusion. It collapses many different household realities into one emotional talking point.
A more serious framework would begin with real wages, because nominal wages alone tell us very little. But wages alone are still too narrow. Households do not live on paychecks alone. They live on a mix of current income, accumulated savings, financial assets, home equity, debt obligations, and access to credit. That means affordability should be measured through some combination of real income and household wealth relative to the price level, with financing costs layered in where relevant. CPI by itself cannot do that. Consumer confidence surveys certainly cannot do that. Feelings are not facts, and sentiment is not purchasing power.
And that matters because economics, at least in public discourse, is too often treated as a branch of organized feeling rather than a discipline rooted in production, exchange, capital, and incentives. Consumer confidence reports get breathless coverage, as though the economy is whatever people tell pollsters they feel it is that week. But confidence is mood. Affordability is capacity. A consumer can feel gloomy because headlines are bad, because eggs cost more than they did three years ago, or because his preferred political tribe is out of power. None of that, by itself, tells you whether his real purchasing power actually declined.
The real question is not whether prices are up. Of course prices are up. In a fiat monetary system nominal prices tend to rise. The real question is whether the household’s capacity to absorb those prices has improved or deteriorated. Over the past year, prices rose by roughly 3%, nominal wages rose 3.5%, real wages were basically flat to slightly positive, and household net worth rose about 8.7%, far outpacing the increase in consumer prices. That does not yield a neat political narrative, but it does yield an honest one: rising prices are only half the affordability equation. The other half is the household’s financial capacity to bear them.
So the next time some politician, pundit, or media talking head declares that life is “unaffordable,” the proper response is not applause. It is a question: affordable for whom, relative to what, and measured how? Because price matters, yes. But affordability is not sticker shock. It is purchasing power. And if we want to discuss it honestly, we need to stop measuring feelings and start measuring financial capacity.
Mark Lazar, MBA
CERTIFIED FINANCIAL PLANNER™
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