Cheap Money Built a Generation of Wealth. What Happens to Housing When It’s Gone?

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 borrowFirst, it’s important to understand that “cheap money” isn’t jus...