Costlier mortgages, slower home gains, and stretched stocks are forcing households to rethink where they put their money.
Central bankers gathered in Bangkok this week are confronting a possibility with enormous implications for household wealth: Cheap money may not be coming back.
“There is a global fight for money,” European central bank policymaker Martins Kazaks told Reuters, pointing to the enormous capital demands of AI as one force pushing borrowing costs higher.
Federal Reserve Chair Kevin Warsh called the investment boom a “shock” and warned the transition could be “very bumpy.”
Wall Street is wrestling with the same question. The 10-year Treasury yield recently climbed above 5%, while BNY CEO Robin Vince described the move as a “normalization” after years of extraordinarily cheap money.
“We’ve had arguably low levels for a very long time,” he told Reuters.
For U.S. households, that could mean a much less forgiving path to building wealth.
As the economy recovered from the Great Recession, households able to buy and invest eventually benefited from a powerful combination: cheap leverage and rising asset values.
But if money stays expensive, both sides of that equation change.
Without cheap money, buyers pay a steep premium just to borrow
First, it’s important to understand that “cheap money” isn’t just a figure of speech.
From 2009 through 2021, the federal funds rate averaged about 0.5%, the 10-year Treasury about 2.3%, and the 30-year mortgage roughly 4%—all dramatically below their averages during the two decades before the financial crisis.
Those rates measure different parts of the financial system, but they move through the same chain: Fed policy influences short-term borrowing costs and market expectations, Treasury yields reflect the price of longer-term money, and mortgage rates tend to follow those longer-term yields.
U.S. net worth boomed, rising by nearly $84 trillion between 2009 and 2021, with roughly $68 trillion—more than three-quarters of that increase—coming from rising asset values.
Two assets accounted for much of that wealth boom: housing and stocks. During that time, homeowners’ equity tripled and household stock and mutual-fund holdings nearly quadrupled.
Of course, low rates didn’t create those gains by themselves, but they supported the wealth boom from both directions: Cheap borrowing increased the purchasing power that households could put toward assets such as homes, while lower interest rates raised the value investors were willing to assign to future income from assets.
The current housing market offers the best illustration of how that trend can slow when cheap money gets harder to find.
By October, the average rate on a 30-year fixed mortgage hit 7.40%—the highest since November 2023—making the monthly cost of buying a comparable starter home higher than renting one in each of the 50 largest metros, according to an analysis by Realtor.com®.
“Renting a starter home is a more budget-friendly option than buying one in the short term,” explains Jiayi Xu, a senior economist at Realtor.com who ran the analysis. “A monthly saving of $960 means more than $11,000 back to the pocket annually.”
Much of that divide can be traced directly to financing.
On the roughly $299,400 average starter home in the analysis, assuming 10% down, a 7.40% mortgage produces a principal-and-interest payment of about $1,866 a month.
At 4%, the same loan would cost roughly $1,286.
Against that backdrop, the hoped-for return to normal never arrived in 2026. September existing-home sales ran at an anemic 3.99 million annualized pace as prices refused to fall enough to offset unexpectedly high borrowing costs.
Buyers are paying more for a slower wealth engine
But slower sales describe the market, and higher rates change the household math much more directly.
Housing traditionally does two jobs at once. Mortgage payments gradually convert debt into equity, while appreciation can increase the value of the entire asset.
Higher rates weaken the first mechanism immediately.
A buyer financing that $299,400 starter home with 10% down at 4% would pay down roughly $25,740 in principal during the first five years.
At 7.40%, the same buyer would build only about $14,760 in equity through principal repayment over that period despite making a substantially larger monthly payment, as more of the early payment goes toward interest instead of ownership.
The other source of housing wealth has slowed as well. National home prices were up just 1.9% year over year in July, according to the S&P Cotality Case-Shiller index, while the New York Fed’s latest housing survey found households expect home values to appreciate about 3% annually over the next five years.
Importantly, those slower than hoped for returns don’t make housing a bad investment.
Homeowners still get exposure to the full value of an asset after putting down only a fraction of its price, allowing appreciation to magnify gains on their initial cash. They also receive the value of living in the home itself, while a fixed-rate mortgage locks in the principal-and-interest portion of their housing payment even if market interest rates rise later.
But the proposition has changed: New buyers are paying substantially more to finance the asset while accumulating equity more slowly.
There may be no easy wealth-building bet left
And the slowdown in housing is occurring as another pillar of U.S. wealth has moved in the opposite direction.
Riding the highs of an AI bull market, stocks now account for more than 30% of total U.S. household assets, compared with roughly 25% for real estate, according to TD Securities. In the mid-2000s, those positions were effectively reversed: Real estate accounted for more than 30% of household assets, while stocks were closer to 15%.
“This is AI versus housing,” said Mark Zandi, chief economist at Moody’s Analytics. “They are bookends of the economy, and AI is leading the way, but housing is struggling to keep up.”
That raises an obvious question: Why not rent and invest the difference?
A renter paying $960 less each month could theoretically redirect some or all of those savings into financial markets—and recent returns suggest they'd be heavily rewarded.
The S&P 500 returned 26.3% in 2023, 25% in 2024, and 17.9% in 2025, including dividends—well above recent appreciation rates.
Younger Americans are already more willing to entertain that idea.
In a 2026 U.S. Bank survey, 62% of Gen Z and 61% of millennials said the stock market offered a more realistic path to wealth than owning a home, compared with 51% of Gen X and 45% of baby boomers.
But those returns are backward-looking.
After the recent run-up, Vanguard says U.S. equity valuations have become substantially more stretched and projects annualized U.S. stock returns of only 4.2% to 6.2% over the next decade—roughly on par with historical home appreciation trends.
But perhaps most crucially, renting doesn't automatically turn the monthly savings into wealth, according to Xu.
“Invest the monthly savings to somewhere else could work well as long as the person is very self-disciplined about actually investing that money consistently instead of spending it," she explains. "But whether it beats buying depends on different people's timeline, risk tolerance, and values on the certainty of owning versus the flexibility of renting."
Even central bankers don't know the new normal is now
The problem is that households waiting for some clarity on borrowing costs may be waiting on an answer policymakers themselves don't yet have.
In Bangkok, central bankers are trying to determine whether R-star—the interest rate that neither stimulates nor restrains the economy—has itself moved higher.
“The problem at the moment in calculating the R-star is that the stars are covered by the clouds, and the clouds are so thick,” South African Reserve Bank Gov. Lesetja Kganyago told Reuters. “We know that R-star is higher, but we do not know how high.”
That’s a different kind of uncertainty from waiting for the next Fed cut. If the neutral rate has shifted, there may be no known level to which borrowing costs are simply destined to return.
And that ambiguity may only compound the affordability problem that's already keeping buyers on the sidelines.
“A larger buying premium in turn could make uncertainty become more threatening," Xu says. "A large premium means less financial cushion to absorb any unexpected shock such as job loss or a sudden expense. The two reinforce each other, keeping many potential buyers on the sidelines."
Expensive money is already reshaping the economics of buying a home and wealth building along with it. The harder possibility is that no one yet knows how much of that change is temporary.