Renting can cost less each month than buying a comparable home, depending on local prices, mortgage rates, taxes, insurance and maintenance. Compare those costs where you live before deciding.
Why? The monthly cost of owning depends on the price and the mortgage rate together. When both are high, the payment can run well above rent for a similar home, even when sellers cut prices.
What about a crash? No one can promise whether or when home prices will fall. Below we cover the numbers behind the gap, what Washington is trying and the three numbers to watch next. Our free Market Briefs newsletter covers real estate, the economy and the markets in one 5-minute email each morning.
Investing involves risk including loss, and past performance does not indicate future results.
A Buyer's Market Where Nothing Got Cheaper
We are officially in a buyer's market in 41 out of the 50 largest metro areas in the United States. Houses sit on the market longer, prices get cut, and sellers give concessions.
Concessions are the incentives a seller throws in, separate from the price cut, to get the house sold.
None of it has made a house affordable. Compare the same median house five years ago to today and you can start to see what's happening.
The Same House, 90% More Expensive Every Month
| 2021 | Today | |
|---|---|---|
| Median house price | $347,000 | $440,000 |
| Mortgage rate (30-year) | 3% | 6.65% |
| Cash for a 20% down payment | $69,400 | $88,000 |
| Monthly mortgage payment | $1,165 | $2,250 |
The house price went up around 27% and the monthly payment went up around 90%.
Unless you are earning twice what you earned in 2021, that same house moved out of reach.
And housing costs don't stop there. A more expensive house means higher property taxes and higher insurance on top of it.
The Housing Market Outran Your Paycheck
In 2021, median household income was around $70,000 a year, and homeownership ate about 20% of the monthly paycheck.
Today median income is around $80,000. That same median house now takes about 33% of monthly income.
| Five-year change | |
|---|---|
| Housing prices | Up 27% |
| Monthly mortgage cost | Up 90% |
| Incomes | Up a little more than 10% |
Inflation lifted incomes a little and the cost of owning a home a lot.
The Housing Market Doesn't Take Orders From Washington
The obvious question is why the government does not just make mortgages cheaper.
It can't, because the government does not set mortgage rates.
The Federal Reserve Bank does set an interest rate, but not yours. It sets the federal funds rate, which is what banks charge each other when they lend each other money.
That rate influences your mortgage interest rate, but does not decide what it will be.
The 10-Year Treasury Yield Runs the Housing Market
The number that actually drives mortgage rates is the 10-year Treasury yield.
A Treasury Yield is the amount of interest an investor receives for loaning the government money via a bond.
What the government pays you is called the risk-free return, because the government always pays its bills. It can raise taxes, or work with the central bank to print money.
Your bank has to price against that. If the government pays 5% to borrow, Chase or Bank of America is not lending to you for less.
You might lose your job or forget to pay a bill. The government will not, so you pay a premium.
That means when Treasury yields climb, mortgage rates climb with them. And over the last few years they climbed hard.
Then the Government Broke Its Own Bond Market
The first reason yields rose is inflation.
Inflation is usually described as prices going up, but the word comes from inflate. What gets inflated is the money supply.
Create more dollars and each one is worth less.
Some of the 2026 inflation is leftover money printing from the 2020 and 2021 pandemic, and some of it is tariffs.
A lot of it right now is the war in the Middle East, through both higher prices and more money printing.
So when the government shows up wanting to borrow $1 trillion, lenders hesitate. Nobody wants to hold dollars for 30 years while worrying about inflation.
The government's answer is to raise the interest it pays.
The second reason is newer, and stranger. In 2026 the United States government kind of broke the bond market.
We had been spending trillions we did not have, and it worked because lenders kept showing up. Then they stopped showing up in large enough numbers, and Treasury rates ran to their highest levels in decades.
So the government bailed out the bond market by becoming its own lender.
Issue more short-term debt, where there are still plenty of lenders, and use that money to pay off the long-term debt, which is around $40 trillion BTW.
It is an attempt to control the interest rate environment, and mortgage rates along with it. The pressure has been building since the pandemic, and especially over the last 12 to 18 months.
High Rates Froze the Housing Market Shut
Expensive mortgages do two things to the housing market.
First off, they price people out, which is exactly why more buyers now say they will just rent.
The second is a freeze. Millions of people bought or refinanced during the pandemic and now sit on 2%, 3% and 4% mortgages.
They are not trading those in for a 7% one.
This is the mortgage lock-in effect, and it is why supply stays tight. Right now 69% of homeowners have a mortgage locked in under 5%.
Why the Housing Market Crash Never Came
Prices this high make people ask whether a crash is coming, and why it has not happened yet.
Housing prices move up much faster than they move down. And 2026 does not look like 2008.
| 2008 peak | 2026 | |
|---|---|---|
| Homeowners underwater | 23% | About 2% |
| Months of housing supply | About 13 | About 4 |
| Foreclosures | 2.9 million | 730,000 listings |
| Unemployment | About 10% | About 4% |
Underwater means owing more than the house is worth. Months of supply is how long it would take buyers to clear every listing if nothing new came on the market.
The foreclosure number is the one people panic about. It looks enormous because foreclosure listings were essentially zero during the pandemic, so the rebound is steep.
But 730,000 is roughly where we sat before the pandemic.
Unemployment, according to the government, is around 4%, so people still have income to make their payments.
If home prices fall harder, that 2% underwater figure will move. Those are the two numbers worth watching.
Today, the warning signs are not in the data.
The Housing Market Is Running Out of Buyers
Prices are near record highs, mortgage rates are at multi-decade highs, and nobody knows when relief arrives. So buyers are walking.
We now have the lowest number of first-time home buyers in the history of the country.
The median age of a home buyer today is 56 years old. That is the oldest ever recorded in America.
Everyone in the real estate business is trying to talk people into buying. Builders are handing out more incentives than they have in years.
Washington's Four Fixes for the Housing Market
The Trump administration is trying to unstick it four ways.
- An executive order making mortgages cheaper and faster using AI-powered home appraisals.
- A new retirement account, the Trump IRA, whose money can fund a first-time down payment.
- An order for Fannie Mae and Freddie Mac to buy hundreds of billions of dollars of mortgage bonds, to push mortgage costs down.
- A cutoff of government financing for Wall Street investors buying single-family houses, so buyers are not bidding against them.
None of it has made buying easy yet, so more people keep landing on renting.
Renting the Same House Saves $900 a Month
Real estate is local, so your city will look different. This is the national average.
Buy that median house at $440,000 with 20% down and you are writing an $88,000 check. Add closing costs, property taxes, insurance and the rest of monthly ownership, and it runs about $3,300 a month.
Renting that same median house runs about $2,400.
So you keep the $88,000, and you keep about $900 every month.
Stretch that over ten years and the gap widens.
| Ten years out | Buyer | Renter who invests |
|---|---|---|
| Assumption | Home prices grow about 3% a year | Money grows 8% a year |
| Ending amount | $260,000 to $290,000 after closing costs | About $350,000 |
The renter invests the $88,000 down payment and then invests that $900 a month. At 8% a year, which is below what the stock market has averaged, that is roughly $350,000.
Round the buyer up to $290,000 and the renter still finishes ahead.
Why Your Home Is Still a Liability
Jaspreet does not love that example, because it treats a house as an investment. He thinks that is the first mistake.
For context, he rented for years while buying rental properties, buying stocks and building his business. He and his wife bought their house last year, at a high mortgage, and he will tell you they overpaid.
They bought because they could comfortably afford it. Afford means the down payment, the monthly payment and the moving costs.
That last one includes movers, upgrades and furniture.
He is not against owning. Owning a home free and clear removes the mortgage payment and the rent payment, and that peace of mind is worth something real.
The mistake is deciding your house is your best investment. That thinking talks you into something bigger and nicer, and then the maintenance, repairs and upgrades arrive.
Now the house is a money pit, you are stressed about the bills, and there is nothing left to put into other assets.
Treat the home you live in as a liability and you buy what you can afford, which leaves money to invest.
Do it in that order and the bigger house stops being a stretch later.
Will Mortgage Rates Go Down in 2026?
President Trump keeps saying he wants lower interest rates, and says America should have the lowest in the world. He got to pick the new chairman of the Federal Reserve Bank, Kevin Warsh.
Warsh has since said he may not be able to cut aggressively or quickly, because of inflation. He has gone further and said rates might have to go up to fight it.
That is not what anyone hoping for a cheap mortgage wanted to hear.
Three Numbers That Decide the Housing Market Next
Watch inflation and the job market first. Together they steer Treasury yields, and they steer what the Fed does next.
When people stop worrying about inflation, the dollar and the economy, Treasury yields fall and mortgage rates follow.
A strong job market plus calm inflation gives the Fed room to cut. Mortgage rates ease from there.
Then watch inventory. Sellers are staying put to protect cheap mortgages, but a weaker economy could make some of them desperate enough to list.
More houses for sale gives the market breathing room, and can pull prices down.
Whether that is good news depends entirely on where you are standing. Cheap houses are great if you are buying and awful if you already own one.
Good and bad in the housing market are just two names for the same number.
Whatever the housing market does next, you can follow it as it happens. Get the free Market Briefs newsletter, one 5-minute email each morning on the economy, stocks, real estate and crypto.
