U.S. housing costs could return to their 2018 relationship with incomes within about six years even if mortgage rates stay near 7.5%, provided home-price growth flattens, according to an analysis Redfin published Oct. 8. Cut rates to 6% and keep price growth near its current 2.1% annual pace, and the timeline shortens to roughly five years.
The more useful finding is the geography, and it runs opposite to intuition. Costs get back to normal soonest in some of the most expensive markets in the country — San Jose, Austin, Oakland, Seattle and Portland, Ore. — and slowest in about half the metros studied, concentrated in the Midwest and Northeast.
Redfin defines “normal” as a return to August 2018 levels of the mortgage-payment-to-income ratio, which stood nationally at 30% that month, a widely used affordability benchmark. The firm modeled six mortgage-rate scenarios — 6%, 6.5%, 7%, 7.25%, 7.5% and 8% — against current local price trends and metro-specific income projections drawn from 2015 to 2019 Census data, covering 46 of the 50 most populous metros. Payments include principal and interest on a 30-year loan plus property tax and insurance, assume a 20% down payment, and fix insurance at 0.5% a year.
Redfin is explicit that these are not forecasts: “The analysis is theoretical, and the hypothetical scenarios should not be read as predictions,” the report says.
Falling prices do more work than falling rates
San Jose, Calif., is closest to the line. Home prices there are down 3.2% year over year and Redfin projects 6.5% annual income growth, which would put costs back to 2018 levels by October 2027 at today’s 7.5% rates — and immediately if rates fell to 6%. Austin, Texas, where prices are down 2.9% and Redfin projects 4.9% income growth, follows in February 2028 at 7.5% rates. Oakland, Calif., reaches it in April 2028, Seattle in June 2029 and Portland in February 2030 under the same rate assumption.
Redfin attributes Austin’s price declines to weak demand meeting heavy supply built during the pandemic, and the Bay Area income projections to the region’s tech economy. The pattern across the five is consistent: where prices are falling or flat and incomes are rising, a large rate cut is not required.
Redfin also stresses a distinction that gets lost in affordability coverage. At the metro level, normal does not mean affordable — it means prices relative to incomes have returned to where they were in 2018. A median-earning Bay Area household would still need to spend well above 30% of income to buy, exactly as it would have then. In those markets, the report notes, ownership is concentrated among wealthier households.
Ten-plus years across much of the Midwest and Northeast
In 24 of the 46 metros, costs do not return to 2018 levels within a decade under any rate scenario between 6% and 8%, because prices are climbing faster than incomes. The list includes Chicago, Philadelphia, Detroit, Baltimore, Milwaukee, Indianapolis, St. Louis, Kansas City, Mo., Providence, R.I., Virginia Beach, Va., Anaheim, Calif., New York, Newark and Nassau County, N.Y.; Cleveland, Cincinnati and Columbus, Ohio; and the Florida markets of Tampa, Jacksonville, Fort Lauderdale and West Palm Beach.
Chicago home prices are up 5.5% year over year against projected income growth of 3.9%; in Nassau County, prices are up 5.3% against 3.6%. Redfin calls Nassau County the strongest seller’s market in the nation.
“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 parts of the West, home prices are falling while we expect incomes to keep rising, gradually bringing the markets back to a baseline. But in many Midwest and East Coast markets, home prices are still climbing faster than incomes–so even if rates were to drop meaningfully, a buyer’s monthly payment wouldn’t return to something that feels normal anytime soon.”
San Francisco shows how narrow the band is
The single most striking number in the report is a quarter of a percentage point. As recently as the third week of September, with rates near 7.25%, San Francisco’s housing costs had just barely returned to normal, Redfin says. At 7.5% they move 10-plus years out of reach. The reason is price growth: San Francisco prices are up 9.7% year over year, which Redfin attributes to AI-driven wealth, against projected income growth of 7.7%. Once prices climb that fast, a rate threshold crossed in either direction moves the timeline by years, not months — a dynamic consistent with the split that has opened between San Francisco and Seattle, two tech housing markets now moving in opposite directions.
The analysis lands against a backdrop of strained affordability that Redfin’s own prior work has tracked, including the income needed to afford a typical U.S. home holding near a record $110,000. On our reading, the report’s practical value for agents and sellers is not the dates but the sensitivity it exposes: in markets with flat or falling prices, modest income growth alone restores the 2018 math, while in markets still appreciating at 5% or more, even a meaningful rate cut does not. That makes for a very different conversation with a seller in Chicago than with one in Austin, in what national housing-market numbers present as a single recovery.
