When will housing costs in your market return to 'normal'?

San Jose and Oakland, California, along with Austin, Texas, would see housing costs return to “normal” today if mortgage rates fell to 6 percent.

At rates near today’s 7.5 percent, San Jose could return to 2018  rates — described as “normal” — by October 2027. In New York, the wait is at least a decade if the rate stays between  6 percent and 8 percent, according to a Redfin analysis released Thursday.

The report covers 46 large metros and measures housing costs as the share of median household income needed for a monthly mortgage payment. It defines “normal” as each market’s August 2018 level, when that share was 30 percent across the U.S. Redfin called its scenarios hypothetical and said they “should not be read as predictions.”

What it would take across the US to hit ‘normal’

The national timeline depends on a combination of mortgage rates and home-price growth, which Redfin put at 2.1 percent a year:

• 6 percent rates and flat prices: February 2029
• 6 percent rates and 2.1 percent price growth: Within five years
• 7.5 percent rates and flat prices: Around 2032
• 7 percent to 8 percent rates and 2.1 percent price growth: 10 years or more

Redfin described the first and last scenarios as unlikely and put the current rate at about 7.5 percent. 

The metros closest to ‘normal’

Four West Coast metros and Austin, Texas, top the list. Home prices are falling in all five, and Redfin projects income growth of 4.9 percent to 6.5 percent a year.

The next five at a 7.5 percent rate are San Antonio (January 2031), Sacramento (April 2031), Denver and Los Angeles (both June 2032) and Fort Worth (February 2033).

“It may seem counterintuitive that housing costs could return to normal sooner in the country’s most expensive markets than in a place like Chicago or Philly, but it comes down to the direction of home prices and incomes,” Redfin Senior Economist Asad Khan said in the report. “In parts of the West, home prices are falling while we expect incomes to keep rising, gradually bringing the markets back to a baseline.”

Asad Khan

A return to 2018 levels would still leave the median home out of reach for the typical household in San Jose, Oakland and Seattle, where buyers needed more than 30 percent of their income in 2018 as well, Redfin noted.

Twenty-four metros, including New York, Chicago and Philadelphia, would take at least a decade at any rate from 6 percent to 8 percent if local price growth holds. Chicago home prices are up 5.5 percent from a year ago against projected income growth of 3.9 percent. 

San Francisco: At ‘normal’ at 7.25%, a decade away at 7.5%

San Francisco’s housing costs had returned to 2018 levels in the third week of September, when mortgage rates were about 7.25 percent. At 7.5 percent or 8 percent, the metro would need at least a decade to get back. Home prices there are up 9.7 percent from a year ago, which Redfin attributed to AI-driven wealth, and incomes are projected to grow 7.7 percent a year.

Redfin’s projections assume a 20 percent down payment, current local price growth and income growth based on Census data from 2015 to 2019.

By the numbers

• 30 percent: Share of household income the typical U.S. homebuyer needed for a monthly mortgage payment in August 2018
• 6 percent: Mortgage rate at which San Jose, Austin and Oakland would return to “normal” now
• February 2029: Earliest national return, at 6 percent rates and flat prices
• 2032: National return at 7.5 percent rates and flat prices
• 24: Metros at least a decade away at any rate from 6 percent to 8 percent
• 9.7 percent: Year-over-year home-price growth in San Francisco

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