A Path Back to ‘Normal’
Housing affordability may not require a market crash to improve. Instead, a period of stability could be enough, according to a new Redfin analysis.
“The path back to normal housing costs doesn’t require a crash in home prices — stability may be enough,” said Asad Khan, Redfin senior economist.
Redfin uses July 2018 as its baseline for “normal.” At that time, mortgage rates averaged in the mid-4% range, and the typical mortgage payment consumed about 30% of household income — the standard affordability benchmark.
Today’s Reality: Better, But Still High
As of July 2025, the typical U.S. mortgage payment equals 38% of median income. That’s an improvement from 42% in fall 2023, but it’s still far above pre-pandemic levels.
Redfin forecasts that if:
- Mortgage rates drop to 5.5%
- Household incomes rise 3.9% annually
- Home prices grow just 1.4% per year
…then U.S. housing costs could return to 2018 affordability levels by November 2030.
“Buyers shouldn’t expect affordability to snap back overnight, but the trend lines point to real progress within this decade,” Khan said.
Local Variations: Not All Markets Equal
While national averages point to gradual improvement, affordability varies widely across metros.
- San Francisco: Already back to 2018 levels, though “normal” there still means paying 67% of income toward a $1.5 million median-priced home.
- Austin & Denver: Rising wages and slower price growth could push these markets back to 2018 affordability levels within the next year.
- Midwest & East Coast: Faster price growth this year makes a return to normal less likely anytime soon.
How We Got Here
The pandemic housing frenzy — driven by sub-3% mortgage rates and tight supply — pushed home prices up more than 40% in just a few years. Bidding wars and investor activity added pressure, while later Fed rate hikes sent mortgage rates soaring near 8% in 2023.
Many homeowners, locked into ultra-low rates, chose not to sell, keeping inventory tight even as borrowing costs climbed. Only recently has supply started to rebound, particularly in Florida and Texas, where builders have been active.
Will 5.5% Mortgage Rates Happen?
Redfin’s projection relies heavily on rates falling to 5.5% long-term. That’s far from guaranteed. The Fed remains cautious amid economic uncertainty tied to tariffs and a cooling labor market.
Even if rates do decline, Redfin warns that about half of the nation’s major metros — including New York, Chicago, Boston, and Philadelphia — may not reach 2018 affordability by 2030 if price growth continues at today’s pace.
The Bottom Line
Affordability is improving slowly, but the road back to “normal” housing costs will take years. Stability — not a dramatic correction — is what could bring balance.
“While this process is gradual, the momentum is heading in the right direction,” Khan said.