What happened
A recent analysis by Redfin suggests that housing affordability in the US may not return to 2018 levels until 2031. The study found that while national housing costs could decrease, buyers in areas like New York City and Long Island may face another decade of high costs due to home prices outpacing incomes.
The analysis assumed different scenarios, including mortgage rates falling to 6% and annual home-price growth holding steady at 2.1%. However, if rates remain around 7.5% and home prices stop rising, affordability could recover by April 2032. In a more optimistic scenario, where rates drop to 6% and prices flatten, housing costs could return to pre-pandemic levels by February 2029.
According to Redfin senior economist Asad Khan, the direction of home prices and incomes is crucial in determining when housing costs will return to normal. In many Midwest and East Coast markets, home prices are still climbing faster than incomes, making it difficult for buyers to afford homes even if rates drop.
The study examined 46 major metropolitan areas and found that some West Coast markets, such as San Jose, California, could recover relatively quickly due to declining home prices and projected wage growth. However, areas like Long Island, New York City, and Chicago may face a longer recovery period.