Housing affordability may not return to pre-pandemic levels until 2047

For years, homebuyers have been told that the housing market will eventually “return to normal” — meaning that if mortgage rates decline or inventory improves, affordability will return to something resembling pre-pandemic levels such as 2019.

But new data from Realtor.com suggests that version of the market may never return, and that a return to pre-pandemic affordability will require outcomes that economists say are highly unlikely.

The numbers underscore a starker reality for buyers, as one expert points out: America’s housing affordability problem is not just cyclical, but largely structural.

“It’s not a realistic standard. I think the problem in the housing market is a structural problem that’s been going on for decades,” Dan Coakley, director of affordable PMG, told Fox News Digital.

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“Although it may seem like things were more affordable in 2019, this kind of march toward a lack of affordability has been going on for a long time,” he continued. “And it will take a long time to make a dent in it.”

“I don’t think affordability will ever get back to the point where people feel like it’s manageable.”

For the U.S. housing market to feel affordable again, a recent Realtor.com report found that it would require mortgage interest rates to fall to about 2.65%, median household incomes to rise by about 56%, or home prices to fall by about 35%. Realtor.com defines “affordability” as a mortgage payment equal to about 21% of median household income, compared to more than 30% currently.

“How radical these moves are in terms of interest rates or falling house prices or increasing incomes, that shows you how much work we have to do,” Coakley responded. “I have to congratulate the Trump administration now for putting this in focus, because I think it’s going to be really essential, and getting all of these tools moving as much as we can is going to be extremely important.”

Coakley added that he does not expect interest rates to fall below 3% or even close to that level, noting that median incomes have not kept pace with rising rents and home prices.

“People from lower income levels or middle income levels, even above-middle income levels, have not been able to access and participate in the rising asset level that was so fundamental to the American dream and what drove people’s net worth,” he explained.

“Increasing supply is probably one of the most important things we can do that the administration can leverage to help with this crisis,” Coakley said. “Movements of a similar kind – incentives, [subsidies] To incentivize the developer to build a product for sale at affordable prices – it will be very welcome in the sector.”

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Attempts to fix one side of the equation often backfire, Coakley said, because housing sits at the intersection of finance, wages and long-term price trends that have outpaced income.

“You’re playing with one lever and cutting interest rates too much, and that’s probably an indicator that the economy isn’t healthy — that income won’t keep up with the inflation that that would cause,” he said.

Last week, the Trump administration proposed two major federal housing policies that Coakley said he viewed optimistically: directing Fannie Mae and Freddie Mac to buy up to $200 billion in mortgage securities and proposing restrictions on large institutional investors buying single-family homes.

“Politicians on both sides of the aisle should be able to support [this]“I think these are the kind of big structural moves that, actually, combined with other things, could move the needle… It might be encouraging for people psychologically that they have management that understands what’s fair and what’s not fair,” the homebuilder said.

Looking at the housing horizon, Realtor.com estimates that if mortgage rates remain around the mid-6% range and wages and prices grow at the pace of 2025, a return to pre-pandemic affordability could be delayed until about 2047 — underscoring the depth of the challenge.

Coakley ultimately argues that chasing the past is a mistake and that policymakers and the broader real estate sector should focus on realigning the cost structure of housing in order to increase affordability over the long term.

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“I think we are definitely at risk of normalizing that level of affordability, which is a catastrophic problem we have,” he noted. “Psychologically, it’s not good for family formation. It’s not good for job creation. It’s not good for our cities and our communities.”

“You can throw it away in terms of interest rate policy, but really, we need to get back to the table with ways to bring cost down to for-sale housing… I think starting to think about ways to develop new programs that facilitate similar affordable housing, but that can be for-sale, and where people can feel like they’re participating in the upside of their most important or perhaps largest asset, I think will be critical in thinking through the strategy.”

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