FORT WAYNE, Ind. (WOWO) — Housing affordability could improve over the next five years, but prospective homebuyers may have a long wait unless mortgage rates fall and incomes continue to outpace home price growth. A new analysis from real estate brokerage Redfin finds that housing costs could retu rn to more historically normal levels within five years under a scenario in which mortgage rates decline to 6% and home prices continue rising at a slower annual pace of about 2.1%. The analysis, reported by Fox Business, suggests that affordability does not necessarily require home prices to plunge. Instead, the gap between what homes cost and what households earn could narrow gradually as wages rise and home price growth cools. “When we say housing costs could return to normal within five years, we don’t mean prices are just going to fall off a cliff. We mean the gap between what homes cost and what people earn can close, mostly because incomes keep growing while price growth cools,” Redfin chief economist Daryl Fairweather told Fox Business. Fairweather cautioned that the process would not provide immediate relief to buyers already struggling to afford a home. “That’s not a quick fix, and it won’t feel like one for buyers who are stuck waiting right now. But we anticipate the math will move in the right direction, and that matters,” she said. Mortgage rates are a critical part of the outlook because they determine how much borrowers pay each month to finance a home. Even when the purchase price remains unchanged, a higher interest rate can substantially increase a buyer’s monthly principal and interest payment. Redfin’s projections show how different combinations of mortgage rates and home price trends could change the timeline for affordability to improve. If mortgage rates fall to 6% and annual home price growth continues at roughly 2.1%, housing costs could normalize within five years, according to the analysis. If rates remain near 7.5% and home price growth flattens, the process could take about six years. A more favorable scenario would involve mortgage rates dropping to 6% while home prices stop increasing. Under that projection, Redfin estimated housing costs could return to normal by February 2029. If rates fall to 6% and home prices decline by 2% year over year, affordability could improve even sooner, with the analysis projecting a return to normal levels by May 2028. The outlook becomes considerably less favorable if borrowing costs remain high and home prices continue climbing. If mortgage rates stay between 7% and 8% while prices rise at an annual rate of approximately 2.1%, housing costs could take 10 years or longer to normalize. Those projections underscore the challenge facing buyers who have already been squeezed by elevated home prices and expensive mortgages. A modest slowdown in price growth may not be enough to bring monthly payments within reach if interest rates remain high. The recovery also is unlikely to happen evenly across the country. Redfin identified San Jose, California; Austin, Texas; Oakland, California; Seattle, Washington; and Portland, Oregon, as metropolitan areas that could see housing costs return to more normal levels sooner than other markets. By contrast, roughly half of the metropolitan areas included in the analysis could take at least a decade to reach that point. Those areas include major markets in the Northeast and Midwest, such as Boston, the New York City area, Chicago and Milwaukee. Redfin also found that markets where home prices are increasing faster than the national average are likely to face a longer road back to affordability. For buyers in the Midwest, that means national forecasts may offer limited reassurance. Local home prices, household incomes, available housing supply and prevailing mortgage rates will all influence how quickly individual markets become more affordable. Fairweather advised prospective buyers against trying to predict the exact moment the housing market will turn in their favor. “Buyers shouldn’t try to time the market perfectly. If you find a home you can afford and plan to stay for a while, don’t let the headlines scare you away from it,” Fairweather told Fox Business. “And if you can’t afford to buy yet, the trend is on your side.” The report offers a potential path toward better affordability, not a guarantee that prices will fall or that every market will recover within five years. The timeline depends heavily on mortgage rates, income growth and home price trends, leaving some buyers facing years of high costs even if conditions improve nationally. The post When Will Homes Become Affordable Again? Redfin Outlines What Needs to Change appeared first on WOWO News/Talk 92.3 FM and 1190 AM. ...read more read less