I bought my first home in 2022, when mortgage rates were starting to rise from their sub-3% lows of the Covid-19 pandemic. Like many buyers, I wanted to buy a house before mortgage rates climbed too high.
Amid this surge in home-buyer demand, home-sale prices spiked. I had to offer tens of thousands of dollars over the listing price for a seller to finally accept my offer.
And I don’t think housing costs have felt the same since.
Home prices are growing at a much more modest pace in 2026, but that spike in 2022 and 2023 put them at a high threshold.
Mortgage rates have ticked up and down occasionally, but they’re also significantly higher right now. The average 30-year fixed mortgage rate hit 7.40% on Oct. 8, according to Freddie Mac, its highest point since November 2023.
The high home prices and mortgage rates have made monthly mortgage payments unaffordable for many Americans. So, will housing costs ever go back to “normal?”
Actually, they might. In fact, the real estate technology company Redfin thinks they could return to normal in just five years.
Read more: Zillow predicts major mortgage rate, housing market change
What are ‘normal’ housing prices?
To understand Redfin’s predictions, you need to know what the company means by “normal” housing prices.
In this Redfin report, housing costs are considered “normal” when they return to their August 2018 levels. Redfin measures this using the mortgage-payment-to-income ratio, or the amount you spend on monthly mortgage payments compared to your monthly gross (pre-tax) income.
When Redfin talks about a monthly “mortgage payment,” it’s assuming you have a 30-year mortgage. The mortgage payment also includes the principal, interest, property taxes, and insurance.
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To break down how this ratio works, I’ll give an example. Let’s say your monthly gross income might be $8,000, and your mortgage payment might be $2,400. This monthly payment is 30% of your income, so your housing costs would be considered “normal.”
The 30% mortgage payment-to-income ratio threshold is a well-known benchmark for housing affordability, according to a 2018 Harvard University Joint Center for Housing Studies paper.
Redfin analysts are clear that “normal” and “affordable” are not synonymous.
“At the metro level, ‘normal’ does not necessarily mean ‘affordable;’ rather, ‘normal’ means the metro has returned to its 2018 level of home prices relative to incomes, even if the median home in some expensive metros remains out of reach for the typical household,” wrote Redfin.
Redfin says housing costs could return to normal in 5 or 6 years
Redfin outlines four key scenarios in this analysis.
First, home-price growth holds steady at about 2.1%, but mortgage rates fall to 6%. In this case, housing costs could go back to normal within five years.
Second, housing prices could return to normal in six years if the opposite happens — if home-price growth flattens and mortgage rates stay around 7.5%.
The third option is the best-case scenario: Mortgage rates drop to 6% and home-price growth flattens. This could bring costs back to normal in just a little over two years, in early 2029. However, Redfin notes that this is an unlikely outcome.
The fourth option is the worst-case scenario. If mortgage rates hold between 7% and 8% and home-price growth continues at 2.1% annually, it could take at least 10 years for housing costs to return to normal.
“That’s also unlikely but possible: If rates stay that high, home-price growth would be difficult to sustain without a further decline in home sales,” Redfin wrote.
Housing costs could return to “normal” in five or six years, Redfin estimates.
When will mortgage rates or home prices decrease?
Mortgage rates have been spiking lately, but economists expect them to cool down in the near to medium future.
Zillow forecasts that the average 30-year fixed mortgage rate will drop to 7.1% by the end of 2026 and reach 6.5% by the end of 2027. The September 2026 Fannie Mae Housing Forecast put the 30-year fixed rate at 6.8% through the end of 2026, then at 6.7% throughout 2027.
The Mortgage Bankers Association’s mortgage rate forecast through 2027 is fairly similar to Fannie Mae’s. The association expects home price growth to cool off over the next few years, though. In the September MBA Mortgage Financial Forecast, it puts the FHFA U.S. House Price Index annual rate of change at 0.8% for 2026, 0.5% for 2027, and 1.2% for 2028.
The housing market is always full of twists and turns. Something could happen to cause mortgage rates or home prices to shift drastically one way or the other.
But looking at current predictions, it’s more likely that housing costs will take a little longer than five or six years nationwide — but probably not 10 years.
However, if you can afford to buy before then, don’t waste time and energy trying to time the real estate market.
“Many house hunters feel stuck between two bad options: Stretch themselves to buy at today’s rates, or wait for lower rates only to see prices climb further out of reach,” said Redfin Senior Economist Asad Khan. “But prospective buyers shouldn’t get hung up on timing the market.”
“These hypothetical scenarios should give would-be buyers and sellers some hope that the market can normalize with only modest changes in rates or prices,” Khan said.
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