While not many individuals are benefiting from the current housing market, there are indications that achieving affordability might not be an unattainable goal.
A recent analysis from Redfin suggests that, if price growth stabilizes, home prices could approach “normal” levels by 2030. Factors like rising incomes and a drop in mortgage rates to about 5.5% contribute to this outlook.
“We don’t necessarily need a sharp decline in home prices to return to normal housing costs. Stability might be enough,” stated Asad Khan, a senior economist at Redfin.
To assess housing costs, Redfin analyzed the proportion of income dedicated to mortgage payments, taking July 2018 as the reference point. Back then, mortgage rates were roughly in the 4% range and a typical mortgage payment accounted for about 30% of income—a benchmark often considered affordable.
Currently, mortgage payments for the average U.S. home take up about 38% of the median household income, which is an improvement from the 42% observed in the fall of 2023 but still significantly higher than pre-pandemic levels.
According to Redfin, with mortgage rates dropping to 5.5% and household incomes rising at an annual rate of about 3.9%, housing costs could revert to their July 2018 levels by November 2030, while home prices increase modestly at 1.4% annually.
“Homebuyers shouldn’t expect a sudden drop in prices, but the trend suggests we’re making real progress over the past decade,” Khan added. “There’s a cautious optimism that what many consider normal might not be as far off as it seems.”
Yet, achieving “normal” doesn’t automatically equate to affordability, and standards can vary greatly from one city to another.
San Francisco stands out as the only major metropolitan area where housing costs have already returned to July 2018 levels. This is largely due to mortgage payment ratios that surpass the national average, having dropped from 74% in 2018 to over 67% now.
In California, the median home price is around nearly $1.5 million, which, while closer to “normal,” is still far from what most would consider affordable.
Areas like Austin, Texas, and Denver are experiencing wage growth alongside a moderation in home price increases, so they may reach 2018’s affordable levels within the coming year.
If this trend continues, it could signal the end of the tumultuous ride the U.S. housing market has undergone since the pandemic. This earlier instability was fueled by historically low mortgage rates that incited bidding wars, pushing prices up by over 40% in a matter of years, compounded by a tight supply and increased investor demand.
While the Federal Reserve’s decision to raise interest rates has raised borrowing costs, many homeowners remain locked into low rates, leading to a reluctance to sell and contributing to an inventory shortage and persistently high prices.
Despite this, buyers are beginning to gain some leverage in several markets, especially where supply is gradually recovering—like in Florida and Texas, where builders are active. However, prices remain stubbornly high in other areas.
“As price growth has accelerated in markets across the Midwest and East Coast this year, if these trends persist, it’s unlikely that we’ll see a return to normal housing costs there,” Khan noted.
Redfin’s projections for 2030 assume mortgage rates could drop from about 6.7% to 5.5%, similar to the trends seen during Trump’s administration amid cooling labor markets.
Even with these potential improvements, housing costs may not return to normal in the next decade in approximately half of the nation’s major cities, including New York, Chicago, Boston, and Philadelphia, if home prices continue their current ascent.
The analysis from Redfin examined 46 out of the 50 largest metro areas in the U.S., measuring housing costs by calculating mortgage payment ratios, which compare monthly mortgage expenses (including property taxes and insurance) against regional median household incomes.
