Is the U.S. On the Path Back to ‘Normal’ Housing Costs?

According to a new research from Redfin, if home-price growth stabilizes and mortgage rates drop to 5.5%, experts suggest housing expenses could return to “normal” by 2030.

In many parts of the nation, there is a shortage of new homes being constructed to satisfy demand, mortgage rates are still high, and home prices are close to all-time highs. However, recent weeks have shown some indications that the housing market is moving in the right direction: mortgage rates are beginning to decline and home-price inflation is decreasing.

The latest research from Redfin examines speculative possibilities for the increase of home prices in the United States, mortgage rates, and income levels that would cause housing expenses, as determined by the mortgage payment-to-income ratio, to return to “normal.”

The report’s possibilities, according to Asad Khan, Senior Economist at Redfin are speculative and should not be interpreted as forecasts, but they do suggest that home prices may eventually return to a level that is reasonably affordable.

“The path back to normal housing costs doesn’t require a crash in home prices—stability may be enough,” Khan said. “Buyers shouldn’t expect affordability to snap back overnight, but the trend lines point to real progress within this decade. If mortgage rates decline modestly, and price and income growth hold steady, the market for homebuyers could feel much different by the late 2020s. We are cautiously optimistic normalcy may not be as far off as many might fear.”

Experts Define “Normal” Within Housing Market Terms

Although there isn’t a single point in the housing market that everyone can agree was “normal,” July 2018 was selected as the baseline for this investigation. Home prices were rising but remained within reasonable bounds in July 2018, and mortgage rates were in the middle of the 4% range. There were about equal numbers of buyers and sellers.

The average U.S. household buying a home would have to pay 30% of their salary each month toward their mortgage, as the national median monthly mortgage payment-to-income ratio had recently risen to 30%. This 30% cutoff is a commonly accepted standard for house affordability. Additionally, July 2018 was well before the pandemic began to drive up and down home prices in 2020.

Per the report, if mortgage rates fall to 5.5%, annual household income growth stays at 3.9% and home prices:

• Grow at current rates (+1.4% year-over-year (YoY)), U.S. housing costs will return to normal by November 2030.
• Stay flat YoY, housing costs return to normal by January 2029.
• Fall 2% YoY, housing costs will return to normal by November 2027.
• Grow 2% YoY, housing costs will return to normal in July 2032.

If mortgage rates remain at the current 6.7% level, annual household income growth stays at 3.9% and home prices:

• Grow at current rates (+1.4% YoY), U.S. housing costs will return to normal by December 2034.
• Stay flat YoY, housing costs return to normal by September 2031.
• Fall 2% YoY, housing costs will return to normal by August 2029.
• Grow 2% YoY, housing costs will not return to normal in the next 10 years.

Major Metros May See Slower Progression Toward “Normal”

The scenarios for returning to normal in the top 50 most populated U.S. metro areas varies greatly due to the wide variations in local market situations across the country. Under any of the speculative scenarios, regular housing costs won’t return in the next ten years in many of these big metro areas. In others, typical housing expenses might be recouped rather quickly. Even in those situations, though, it’s crucial to keep in mind that typical housing costs do not always equate to “affordable” housing costs.

San Francisco, the only significant U.S. metro area where housing costs have already stabilized, is a perfect illustration of this dynamic. In other words, compared to 2018, a San Francisco household with the median income will spend a smaller portion of their monthly income to purchase the median-priced property today. A household on the typical San Francisco income would still need to spend an absurd 67% of their income in order to purchase a median-priced property (around $1.55 million), so this does not imply that homes in San Francisco are “affordable.”

However, if prices and household incomes continue to rise at their current rate and mortgage rates drop to 5.5%, 16 of the 50 most populous U.S. metro regions will see a return to normal housing costs in five years. If mortgage rates stay at their current 6.7%, that number falls to 11.

Top 10 Major U.S. Metros Where Housing Costs Will Return to Normal <5 Years

(With a moderately lower mortgage rate of 5.5%)

1. San Francisco (already normal)
2. Oakland, CA (already normal)
3. Austin, Texas (Dec 2025)
4. San Jose, CA (Feb 2026)
5. Denver (Oct 2026)
6. Sacramento, CA (Oct 2026)
7. Seattle (Jan 2027)
8. Portland, OR (Mar 2027)
9. Jacksonville, FL (Aug 2027)
10. San Diego (Aug 2027)

Top 10 Major U.S. Metros Where Housing Costs Will Return to Normal <5 Years

(With the current mortgage rate of 6.7%)

1. San Francisco (already normal)
2. Oakland, CA (Sept 2025)
3. Austin, Texas (Mar 2027)
4. Jacksonville, FL (Oct 2028)
5. Seattle (Oct 2028)
6. Denver (Nov 2028)
7. Sacramento, CA (Nov 2028)
8. San Diego (Feb 2029)
9. San Jose, CA (May 2029)
10. Houston (Sept 2029)

“Tech-driven metros like those in the Bay Area, along with Austin, Seattle and Denver are seeing wages grow considerably faster than the national rate of 3.9%,” Khan said. “At the same time, home price growth in these metros has cooled considerably from pandemic peaks. We have already seen housing costs return to 2018 levels in San Francisco because wages have kept growing at a high rate at the same time that home price growth stabilized.”

Conversely, if home prices continue to rise at their current pace, even if mortgage rates fall to 5.5%, half of the top 50 most populous U.S. metro regions will not see a return to normal housing costs within the next ten years. To read the full report, click here.