Housing expert warns pre-pandemic affordability levels may never return in America
For years, home buyers have been told the housing market would eventually "normalize" — meaning if mortgage rates came down or inventory improved, affordability would return to something resembling pre-pandemic levels such as 2019.
But new data from Realtor.com suggests that version of the market may never come back, and returning to pre-pandemic affordability would require outcomes economists say are extremely unlikely.
The numbers underscore a tougher reality for buyers, one expert points out: America’s housing affordability problem isn’t merely cyclical but largely structural.
"It's not a realistic benchmark. I think that the problem in the housing market is a structural problem that's been going on for decades," PMG Affordable principal Dan Coakley told Fox News Digital.
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"While it might appear that things were more affordable in 2019, this kind of march toward lack of affordability has been going on for a long time," he continued. "And it's gonna take a long time to make a dent in it."
"I don't think that affordability is going to go all the way back to a point where people feel like it's manageable."
In order for the U.S. housing market to feel affordable again, a recent Realtor.com report found that would require mortgage rates falling to about 2.65%, median household incomes rising by roughly 56%, or home prices dropping about 35%. Realtor.com defines "affordable" as a mortgage payment equal to about 21% of median household income, compared with more than 30% currently.
"Just how radical those moves would be with respect to interest rates or home price depreciation or income increases, it just shows you how much work we have to do," Coakley reacted. "I have to compliment the Trump administration now for really putting this into bright focus, because I think it's going to be really necessary, and moving all of those levers as much as we can is going to be super, super important."
Coakley added that he doesn’t see rates going below about 3% or even close to that level, while noting that median incomes have not kept up with surging rents and home prices.
"People at the lower income levels or middle income levels, even upper-middle income levels, have not been able to access and participate in that asset level appreciation that's been so fundamental to the American dream and what's driven people's net worth," he explained.
"Increasing supply is probably one of the most important things we can do and that the administration can kind of foster to help in this crisis," Coakley said. "Similar type moves — incentives, [subsidies] to incentivize a developer to build affordable for-sale product – would 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 financing, wages and long-term price trends that have outpaced incomes.
"You play with one lever and you bring interest rates down too much, that’s probably an indicator that the economy is not healthy — and incomes aren’t going to keep up with the inflation that that might cause," he said.
Last week, the Trump administration proposed two major federal housing policies that Coakley said he views optimistically: directing Fannie Mae and Freddie Mac to buy up to $200 billion in mortgage bonds and proposing limits on large institutional investors buying single-family homes.
"Politicians on both sides of the aisle should be able to support [this]," the homebuilder said. "I think those are the kind of big structural moves that, actually, combined with other things, can actually move the needle... It just can be encouraging to people psychologically that they have an administration that understands what is fair and what is not fair."
Looking out at the housing horizon, Realtor.com estimates that if mortgage rates hold around the mid-6% range and wages and prices grow at a 2025 pace, a return to pre-pandemic affordability could be delayed until around 2047 — underscoring the depth of the challenge.
Coakley ultimately argues that chasing the past is a mistake and that policymakers and the wider real estate sector should focus on realigning the housing cost structure for greater long-term affordability.
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"I think we definitely are at risk of normalizing this level of affordability, a disastrous problem that we have," he noted. "Psychologically, it's not good for family creation. It's not good for job creation. It's not good for our cities, for our communities."
"You can chip away at it on interest rate policy, but really, we need to come back to the table with ways to bring the cost down to bill-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 maybe largest asset, I think will be critical in thinking through the strategy."