Imagine you own a house worth $1 million.
No mortgage.
Just $1 million sitting there.
Now look at what that money can earn.
The 30-year Treasury recently hit 5.337%, the highest level since 2007.
At 5.3%, $1 million produces roughly:
$53,000 a year.
$4,417 a month.
Before taxes.
And the crazy part is that you don’t need to buy another house.
You don’t need tenants.
You don’t need to fix a roof.
You don’t need to replace a furnace.
You don’t need to chase rent.
You can just own a Treasury bond.
Now compare that with the house.
Your $1 million is sitting in the walls.
It isn’t paying you $53,000.
You’re paying property taxes on it.
You’re paying insurance.
You’re paying maintenance.
You’re paying for repairs.
And you’re giving up whatever that $1 million could have earned somewhere else.
This is the part of the housing debate people rarely talk about.
Home equity has an opportunity cost.
And that opportunity cost gets much bigger when long-term Treasury yields are above 5%.
Meanwhile, buying a home isn’t exactly cheap right now.
Realtor.com found that in March, buying a starter home in the 50 largest U.S. metros cost about $920 more per month than renting.
Mortgage rates are still around 6.7%.
So now you have a strange situation.
You can have a million dollars trapped inside a house…
Or you can potentially turn that million into more than $50,000 a year of income.
And rent doesn’t automatically destroy the argument.
If you sell the house and rent for $3,000 a month, that’s $36,000 a year.
Your Treasury income is roughly $53,000.
There’s still about $17,000 left over before taxes.
And you haven’t even counted property taxes, insurance and maintenance you no longer have to pay.
Of course, this isn’t a free lunch.
Treasury interest is taxable.
The house can appreciate.
Rent can rise.
And selling a house comes with transaction costs.
But that’s exactly why this calculation is interesting.
For years, people were told:
“Rent is throwing money away.”
Maybe.
But so is ignoring the return your money could earn somewhere else.
If you have $1 million of equity in a house, you’re not just living in a home.
You’re also sitting on a $1 million investment that has to outperform the alternatives.
At 5.3%, the hurdle is now roughly $53,000 every year before you even start talking about appreciation.
That changes the question.
It’s no longer:
“Is renting throwing money away?”
It’s:
“Is this house worth giving up $53,000 a year for?”
And at today’s Treasury yields, that’s suddenly a much harder question for homeowners to answer.