When Will Housing Costs Return to Normal? A 2025 Outlook Based on Market Data

Based on recent market analysis, housing costs could return to what economists consider "normal" levels by 2030 if mortgage rates decline to 5.5% and home-price growth stabilizes. This assessment assumes household income continues growing at the current national rate of 3.9%. The path to normal affordability doesn't require a housing market crash—moderate adjustments to current trends may be sufficient for buyers to see meaningful improvement by the late 2020s.

What Does "Normal" Housing Affordability Mean?

Housing affordability is typically measured using the mortgage payment-to-income ratio, which compares monthly mortgage payments to household income. For this analysis, "normal" refers to July 2018 market conditions, when the typical U.S. household spent 30% of their income on mortgage payments for a median-priced home. This 30% threshold represents a widely accepted benchmark for manageable housing costs, balancing homeownership expenses with other financial obligations.

The July 2018 baseline was selected because it represented a period of relative market balance before the extreme volatility that began in 2020. Mortgage rates during that time averaged in the mid-4% range, and home prices were rising at a sustainable pace rather than the accelerated growth seen in recent years.

How Do Different Scenarios Affect the Timeline to Normal Costs?

The timeline for returning to normal housing costs depends heavily on mortgage rates and home-price appreciation. Recent analysis models two primary rate scenarios: current levels of approximately 6.7% and a potential decline to 5.5%, which aligns with some economic forecasts for the next 3-5 years.

The most favorable conditions for buyers involve declining mortgage rates combined with stabilized or slightly declining home prices. If rates remain elevated at current levels while prices continue rising, normal affordability may not return within the next decade.

Which Markets Will See Faster Improvement?

Local market conditions significantly impact affordability timelines. Markets with stronger income growth and cooling home prices are likely to see normal conditions return sooner. Approximately 16 of the 50 most populous U.S. metropolitan areas could return to normal housing costs within five years if mortgage rates decline to 5.5% and current trends continue.

Markets that may recover soonest include areas where wage growth exceeds the national average of 3.9% while home price growth has moderated from pandemic peaks. These conditions are often found in technology-focused metropolitan areas where incomes have risen substantially.

However, normal doesn't always mean affordable in high-cost markets. Some areas may technically reach "normal" affordability ratios while still requiring households to spend disproportionately high percentages of income on housing due to elevated baseline prices.

What Practical Steps Can Buyers Take Now?

Focus on your local market conditions rather than national averages, as affordability recovery timelines vary significantly by location. Markets with stronger job growth and income increases may see faster improvement.

Monitor mortgage rate trends alongside home price movements, as rate reductions can offset gradual price increases. Even modest rate declines can significantly improve monthly payment affordability.

Maintain realistic expectations about the pace of improvement. Housing market adjustments typically occur gradually over years rather than months. The path to normal affordability will likely be incremental rather than sudden.

Consider your personal financial readiness rather than trying to time the market perfectly. When your budget, savings, and income support sustainable homeownership, that may be the right time regardless of broader market cycles.