A new report by the Rocket Companies (NYSE: RKT) division Redfin is speculating housing costs could return to “normal” by 2030 – but only if home-price growth stabilizes and mortgage rates fall to 5.5%.
Redfin defined “normal” as the July 2018 housing market when mortgage rates were in the mid-4% range, home prices were rising but still relatively manageable, the number of buyers and sellers was relatively balanced and the national median monthly mortgage payment-to-income ratio had just reached 30%, which is recognized as the benchmark for housing affordability.
The report speculated that if mortgage rates fall to 5.5%, annual household income growth stays at 3.9% and home prices grow at current rates (+1.4% year-over-year), housing costs will return to normal by November 2030.
The report also noted home price growth has been decelerating (although it has yet to reverse) while mortgage rates are ticking down. But Redfin Senior Economist Asad Khan warned the forecast deals with hypothetical scenarios and should not be read as predictions.
“The path back to normal housing costs doesn’t require a crash in home prices—stability may be enough,” Khan said. “Buyers shouldn’t expect affordability to snap back overnight, but the trend lines point to real progress within this decade. If mortgage rates decline modestly, and price and income growth hold steady, the market for homebuyers could feel much different by the late 2020s. We are cautiously optimistic normalcy may not be as far off as many might fear.”
