The 3 factors it would take to make housing affordable are 'very unlikely'

Core Insights - The American dream of homeownership is increasingly out of reach due to rising mortgage rates and home prices, with the average age of first-time home buyers reaching an all-time high of 40 years [1] - The share of first-time buyers has decreased by 50% since 2007, highlighting the lack of affordable housing inventory [2] - Experts believe that significant improvements in housing affordability are unlikely in the near future, despite temporary drops in mortgage rates [2] Mortgage Rates and Affordability - Current mortgage rates are approximately 6.15%, which would need to drop to 2.65% for affordability to improve [4] - To achieve affordability, median household income would need to rise by 56% to $132,171, while current income stands at $84,763 [4] - Home prices would need to decline by 35% to $273,000 from the current $418,000, a significant drop given that home prices have increased over 50% in the past six years [4] Market Realities - Proposed solutions for improving housing affordability are deemed unrealistic given current market conditions [5] - The mortgage market is now more regulated, with many homeowners having substantial equity, and a significant portion of homes (over 30 million) are owned outright without mortgages [7][8] - The share of homeowners without a mortgage has increased to 40% in 2023, up from 33% in 2010, indicating a trend towards conservative borrowing [8] Future Projections - The housing market is expected to remain stagnant regarding affordability unless there is rapid income growth, significant declines in mortgage rates, or substantial drops in home prices, all of which are considered unlikely [9] - Realtor.com forecasts only a minor 0.3% drop in mortgage rates and a 2.2% year-over-year increase in home prices, with wage growth projected at just 3.4% [9] - Even if any of these factors improve, increased demand could lead to rising prices, complicating the affordability issue further [10][11]