Redfin Models a Five-Year Path Back to Normal Housing Costs

Redfin published an analysis on Oct. 8 modeling when U.S. housing costs could return to what it calls "normal." Under one scenario, that could happen within five years if mortgage rates fall to 6% and home-price growth holds near 2.1% a year. If rates stay near today's level, which Redfin puts at about 7.5%, and price growth flattens, it estimates about six years.

Why this matters: The report gives buyers and agents a way to see how much rates, prices and incomes would each have to move. Redfin says the scenarios are hypothetical and should not be read as predictions.

Cover: a winding road toward a house with branching alternate paths. Illustration created for mortgage.news; it does not depict a real person, property or document.

How Redfin defines normal

For this report, "normal" means the national median monthly mortgage payment as a share of household income has returned to its August 2018 level, which Redfin puts at 30%. At the metro level, Redfin says normal means a market has returned to its own 2018 ratio of home prices to incomes. In expensive metros, that can still be unaffordable for a typical household.

The range of outcomes

Redfin describes a wide spread. If rates fell to 6% and price growth flattened, it says costs could return to normal by February 2029, which it calls unlikely but possible. If rates stayed between 7% and 8% and prices kept rising at about 2.1% a year, it says the return could take 10 years or more, which it also calls unlikely but possible.

Big differences by metro

According to Redfin, costs are closest to normal in San Jose, Oakland, Seattle, Portland and Austin, where it says prices are falling and incomes are projected to grow. It says San Jose could get there in just over a year even at 7.5% rates. In half of the metros it studied, including the New York area, Redfin estimates a return could take at least a decade because prices are rising faster than incomes.

Redfin senior economist Asad Khan said in the report that buyers "shouldn't get hung up on timing the market" and that the best time to move "is when it makes sense for your finances and your life."

How to read it

The analysis depends on assumptions about three moving parts: mortgage rates, price growth and income growth. Change any one and the timeline shifts. It is a framework for discussion, not a forecast of when buying will get easier in any particular neighborhood.

Practical takeaway

• Buyers: run your own budget at today's quoted rate rather than at a scenario rate.
• Agents: use the metro detail in Redfin's interactive tool to frame local conversations, and note that "normal" is not the same as affordable.
• Anyone citing the report: describe the five-year figure as one scenario among several.