Housing costs could hypothetically return to “normal” within the next five years if mortgage rates drop to 6% and home-price growth holds steady around 2.1%. Alternatively, housing costs could return to normal in just a slightly longer timeline–within about six years–if mortgage rates stay where they are today, about 7.5%, and home-price growth flattens. For this report, housing costs are measured using the mortgage-payment-to-income ratio; see below for our definition of “normal.”
If mortgage rates were to drop to the lowest bounds of our expectations–6%–and price growth were to flatten, housing costs could return to normal by February 2029, which is just over two years from now. That’s unlikely, but possible.
On the flip side, it could take 10 years or more for costs to return to normal if mortgage rates remain stubbornly high, between 7% and 8%, and prices keep growing at their current annual rate of 2.1%. That’s also unlikely but possible: If rates stay that high, home-price growth would be difficult to sustain without a further decline in home sales.