Housing market won’t be affordable for at least 7 years: Report 

Even if home prices flatten and interest rates fall, it'll take at least seven years for the housing market to swing back toward affordability, according to a new report from Oxford Economics.

The economic advisory firm's latest Housing Affordability Index was measured at 77.9 in the first quarter of 2026. Over the next 10 years, Oxford forecasts three different scenarios for its index based on how home prices and mortgage rates shift:

• Reaching 100 (the level at which homes are generally considered affordable) by 2033 if home prices remain flat and mortgage rates drop by about 50 basis points

• Reaching 100 by 2036 if home prices remain flat and rates do not drop

• Staying below 80 for the next 10 years if historic baseline trends continue

The third outcome is most likely when Oxford's household income, home price and mortgage rate projections are all taken into account, according to the report.

Why the gloomy forecast? These predictions are bleaker than those from other home index models — including the National Association of Realtors' — because they include a wider range of cost variables, including property taxes, homeowners insurance and homeowner association fees. 

Oxford also uses a different measure of income than NAR that's based on the U.S. Census Bureau's American Community Survey, resulting in a lower estimate, the report noted. In 2024, for example, Oxford pegged the median income at $81,604, while NAR's estimate was $101,360.

The recent rise in homeowners insurance rates, particularly in states like Florida, is also having an impact on affordability. If Oxford were to remove homeowners insurance from its calculations, the national index would rise from 77.9 to 83.5, said Nancy Vanden Houten, U.S. lead economist at Oxford Economics and the author of the report.

A need for more housing: The national housing supply crunch is also impacting affordability, with the report estimating that the U.S. is currently short over 2 million units.

With the pace of new home construction insufficient to alleviate the shortage, the low number of existing homes going back on the market is compounding the problem, Vanden Houten said.

The report estimates that the turnover of existing owner-occupied stock averaged 4.7% over the past year, bouncing around levels seen around 2009-2012 during the global financial meltdown. In contrast, the turnover rate in 2020 was around 8%.

"I think more turnover in the existing market would improve housing affordability. But that would just unlock existing supply and doesn't address the underlying shortage of housing units," Vanden Houten said in an email to Real Estate News.

Though Oxford's affordability index factors in a range of costs, "housing affordability is mainly driven by home prices, mortgage rates, and household income," Vanden Houten added. "More than twice as many Americans live in the top 10 states with the highest home price-to-income ratios compared to the 10 states with the lowest price-to-income ratios, where homebuying is more affordable."

While improving, affordability misalignment persists: That disparity of Americans living in markets that aren't affordable for them is echoed in other reports, like in one from NAR and Realtor.com featuring a listing-income score.

Overall affordability is moving in the right direction — "just more slowly, and less evenly, than many expected only a few months ago," said Mark Fleming, chief economist at First American.

According to First American's latest home price index data, affordability improved in 91 of the 100 largest markets between February and March, a slight decline from the previous month when all 100 markets posted improvements.

"The housing market entered the spring season with stronger affordability fundamentals than a year ago, but the recent rebound in mortgage rates is a reminder that affordability gains remain vulnerable to shifts in financial markets and the broader economic environment," Fleming said.