Redfin Projects Housing Affordability Could Normalize in Five Years if Mortgage Rates Decline

Americans grappling with elevated housing costs may see a gradual return to affordability in the coming years, though a new Redfin analysis cautions that the timeline varies significantly depending on mortgage rate trajectories and regional market dynamics.

The report, released last week, projects that housing costs could normalize within approximately five years if mortgage rates fall to 6% and annual home price growth holds steady at roughly 2.1%.

“When we say housing costs could return to normal within five years, we don’t mean prices are just going to fall off a cliff,” said Daryl Fairweather, chief economist at Redfin. “We mean the gap between what homes cost and what people earn can close, mostly because incomes keep growing while price growth cools.”

“That’s not a quick fix, and it won’t feel like one for buyers who are stuck waiting right now,” Fairweather added. “But we anticipate the math will move in the right direction, and that matters.”

Redfin’s analysis estimates that if mortgage rates decline to 6% and home price growth remains steady, housing costs could normalize in about five years. (Lindsey Nicholson/UCG/Universal Images Group via Getty Images)

Should mortgage rates hover near the current 7.5% level while price growth flattens, the normalization timeline extends to roughly six years. Conversely, a drop to 6% combined with flat price growth could see costs normalize by February 2029. If prices were to decline 2% annually alongside a 6% rate, that milestone could arrive as early as May 2028.

In a less optimistic scenario where rates remain elevated between 7% and 8% and prices maintain their current 2.1% annual growth, affordability could take a decade or longer to return to historical norms.

Housing markets in the Midwest and Northeast face a longer timeline for returning to normalcy in housing costs. (Paul Bersebach/MediaNews Group/Orange County Register via Getty Images)

Redfin identified the metros positioned for the fastest recovery: San Jose, California; Austin, Texas; Oakland, California; Seattle, Washington; and Portland, Oregon lead the list.

However, roughly half of the metropolitan areas analyzed—including major markets such as Boston, the New York City area, Chicago, and Milwaukee—are projected to require at least a decade for costs to normalize. Markets where home price growth exceeds the national average are also expected to experience extended timelines.

The normalization of housing costs would be delayed by persistently higher mortgage rates or faster home price growth. (Don and Melinda Crawford/UCG/Universal Images Group via Getty Images)

“Buyers shouldn’t try to time the market perfectly,” Fairweather advised. “If you find a home you can afford and plan to stay for a while, don’t let the headlines scare you away from it. And if you can’t afford to buy yet, the trend is on your side.”

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