Why Housing Affordability Has Not Recovered and What Actually Fixes It

Housing affordability remains one of the most talked about topics in real estate, yet much of the conversation misses the core issue. Buyers are waiting for prices to fall. Sellers are watching interest rates. Headlines focus on short-term swings. But the math tells a different story.

Economist Elliot Eisenberg recently broke down what it would actually take to return homebuyer affordability to pre Covid levels. The conclusions are clear and sobering.

To fully restore affordability, one of the following would need to happen:

Wages would need to rise by 56 percent, pushing the median household income to roughly $132,000 per year.
Mortgage rates would need to fall by approximately 2.65 percent, without triggering higher home prices.
Or home prices would need to decline by about 35 percent.

None of these outcomes are realistic on their own.

Even under a more optimistic scenario where wages rise 19 percent and mortgage rates fall to around 3.85 percent, home prices would still need to decline another 12 percent to fully close the affordability gap.

That context matters.

Why Prices Are Not Collapsing

Unlike prior downturns, today’s homeowners are generally well positioned. Most are locked into low interest rates, carry significant equity, and went through far stricter underwriting standards. This dramatically limits forced selling.

Without widespread distress, sharp price corrections become unlikely.

Why Rates Alone Are Not the Answer

Lower mortgage rates help monthly payments, but they also increase buyer demand. Without more homes available, lower rates often push prices higher. Rates can improve affordability at the margin, but they cannot solve the problem alone.

Why Wage Growth Is Not Enough

Wages are growing, but income growth moves slowly. Expecting household earnings to increase by 50 percent or more is not how labor markets work. This is a long term contributor, not a short term fix.

The Real Solution: Build More Homes

Housing affordability is fundamentally a supply issue.

For more than a decade, the U.S. has underbuilt relative to population growth, household formation, and changing lifestyle needs. Until housing supply meaningfully increases, affordability pressure will remain, even if rates fall.

More housing leads to less competition, slower price growth, and more options for buyers. It is the only sustainable path forward that does not rely on economic pain.

What This Means for Buyers and Sellers

For buyers, waiting for the perfect alignment of lower prices, lower rates, and higher wages is rarely a winning strategy. The better approach is to buy when the numbers make sense for your household and your timeline.

For sellers, scarcity still matters. Well priced homes in desirable locations continue to attract strong interest, especially when presented correctly.

For policymakers, builders, and cities, the message is simple. Build homes.

Final Thought

Affordability will not be fixed by hoping for a market crash or a return to historic interest rates. It will be solved by increasing supply in thoughtful, strategic ways.

Clear thinking and long term planning matter more than headlines.

If you want to talk through how this impacts your buying or selling strategy, I am always happy to have the conversation.