The US housing market is so expensive that incomes would have to spike 55% for it to be considered affordable

The US housing market is so expensive that incomes would have to spike 55% for it to be considered affordable

According to Andy Walden, ICE Vice President of Enterprise Research, the current housing market is facing a significant challenge to return to pre-pandemic affordability.

He outlined three extreme scenarios that would need to occur, including a 35% correction in prices, a 4% decline in interest rates, or a 55% growth in incomes.

However, Walden emphasized that these factors are unlikely to happen in isolation. The housing market, despite facing potential movement, is being impacted by a lack of inventory, keeping prices elevated even as rates rise.

Affordability has been further squeezed by higher mortgage rates and soaring home prices, with rates on the 30-year fixed mortgage nearing two-decade highs. The challenges in the housing market have led to a decline in demand, reaching its lowest point in the last three weeks, impacting affordability at its lowest level in 40 years.

Walden noted that the interest rate effect is not only reducing demand but also pulling down supply, causing gridlock in the market.