Here’s when housing costs could return to ‘normal’: Redfin
Few are winning in today’s housing market, but that doesn’t mean affordability will be out of reach forever.
A new Redfin analysis suggests housing costs could return to “normal” by 2030 if price growth stabilizes, incomes continue to rise and mortgage rates dip to 5.5 percent.
“The path back to normal housing costs doesn’t require a crash in home prices — stability may be enough,” Redfin Senior Economist Asad Khan said in the report.
To measure housing costs, the company looked at the share of income going to mortgage payments and used July 2018 as the baseline. Back then, mortgage rates hovered in the mid-4 percent range, and the typical mortgage payment-to-income ratio was 30 percent — a standard affordability benchmark.
Today, the monthly mortgage payment on a typical U.S. home consumes about 38 percent of the median household income. That’s down from 42 percent in fall 2023 but still well above prepandemic levels, the data shows.
According to Redfin, housing costs could return to “normal” July 2018 levels by November 2030, provided mortgage rates fall to 5.5 percent, household income continues to rise at 3.9 percent annually and home prices keep climbing at their current 1.4 percent pace year-over-year.
“Buyers shouldn’t expect affordability to snap back overnight, but the trend lines point to real progress within this decade,” Khan said. “We are cautiously optimistic normalcy may not be as far off as many might fear.”
But “normal” doesn’t necessarily mean affordable, and the standard in one city may look very different in another.
San Francisco is the only major metro where housing costs have already returned to July 2018 levels. That’s mainly because its mortgage payment-to-income ratio is far above the national average — over 67 percent in July, down from 74 percent in 2018.
The median home price in the California city was nearly $1.5 million in July, a return to normal, though far from what most would consider affordable.
Other tech-driven metros, particularly those where wages are rising and home price growth has eased, like Austin, Texas, and Denver, may see housing costs hit 2018 affordability levels within the next year or so.
If that happens, it could mark the end of the roller coaster ride the U.S. housing market has been on since the pandemic. That ride was fueled by rock-bottom mortgage rates that set off bidding wars, pushing up prices more than 40 percent in just a few years, while tight supply and investor demand added further pressure.
The Federal Reserve’s subsequent rate hikes pushed borrowing costs up, but with so many homeowners locked into historically low rates, few were willing to sell, leaving inventory scarce and prices stubbornly high.
Buyers have since gained the upper hand in several markets, and supply has started to rebound, especially in Florida and Texas, where builders have been busy. But elsewhere, prices have remained sticky.
“This year we’ve seen faster price growth in Midwest and East Coast markets, which makes them less likely to return to normal housing costs soon if we assume those growth rates will continue,” Khan said.
Redfin’s 2030 calculation assumes mortgage rates will fall to 5.5 percent long-term, down from about 6.7 percent in recent months. Such a drop is hardly guaranteed, given the Fed’s recent conservative posture around President Trump’s tariffs and the cooling labor market.
Even if that happens, about half of the nation’s major metros — including New York, Chicago, Boston and Philadelphia — would not see housing costs return to normal within the next decade if home prices keep growing at their current pace.
Redfin’s analysis examined 46 of the top 50 metro areas in the U.S. and used the mortgage payment-to-income ratio as the measure of housing costs. That ratio compares the monthly housing payment on a 30-year mortgage (mortgage, property tax, insurance) to the median household income for a given region.