Why are homes so expensive?
Interest rates set by the Fed ripple all the way to your monthly mortgage payment. See how rates, incomes and supply decide what a home costs — and what a family can afford.
1. Can this family afford this home?
Higher rates shrink what you can afford
Uses the common guideline that housing costs should stay under 28% of gross income. Not financial advice.
2. What moves home prices?
A stylized model. In the real world, housing supply responds slowly — it can take years to build — so demand shocks hit prices first.
Connecting to the big picture
When the Fed raises its policy rate, 10-year Treasury yields and mortgage rates usually rise too. In 2022 mortgage rates jumped from about 3% to over 7%, cutting how much a typical family could borrow by roughly a third.
Loose lending and low rates fueled the 2002–2006 housing bubble; when it burst, it triggered the 2008 financial crisis. Replay it →