PHILADELPHIA, PA — Housing costs in the Philadelphia metropolitan area could take at least another decade to return to pre-pandemic affordability levels, even if mortgage rates fall to 6%, according to a recent analysis by Redfin that places the region among the nation’s slowest markets to recover.
The real estate brokerage identified Philadelphia and Montgomery County, Pennsylvania, among roughly half of the metropolitan markets studied where housing costs could remain elevated for at least 10 years under scenarios involving mortgage rates between 6% and 8% and continued local home-price growth.
The findings underscore the persistent affordability challenges facing prospective buyers in southeastern Pennsylvania, where lower borrowing costs alone may not be sufficient to restore the purchasing power households had before the pandemic.
Nationally, Redfin estimates that housing costs could return to August 2018 levels by November 2031 if mortgage rates decline to 6% and annual home-price appreciation remains at 2.1%.
If mortgage rates instead remain near 7.5% but home-price growth stalls, the national recovery could occur by April 2032.
Those scenarios contrast with the outlook for Philadelphia and other markets in the Northeast and Midwest, where relatively strong home-price growth is expected to prolong affordability pressures.
Redfin’s analysis defines a return to normal as a restoration of each market’s August 2018 mortgage-payment-to-income ratio. Nationally, the median monthly mortgage payment represented 30% of household income at that time.
The measure does not necessarily mean housing becomes affordable for every household. It indicates that the relationship between mortgage payments and incomes has returned to its earlier level.
The analysis models different combinations of mortgage rates, home-price changes and projected income growth rather than forecasting a specific outcome.
Under the most favorable national scenario examined, mortgage rates would decline to 6% while home prices fall 2% annually. That combination could restore the national affordability benchmark by May 2028.
With mortgage rates at 6% and home prices remaining flat, the benchmark could be reached by February 2029.
At the other extreme, rates between 7% and 8%, combined with continued annual price growth of 2.1%, could keep national housing costs above their historical benchmark for more than a decade.
“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.
Khan cautioned buyers against attempting to time the market based on hypothetical interest-rate and pricing scenarios.
“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,” he said.
The regional disparities are substantial.
In San Jose, California, where home prices have declined 3.2% annually and Redfin projects income growth of 6.5%, housing costs could return to their 2018 relationship with incomes by October 2027 even with mortgage rates at 7.5%.
Austin, Texas, could reach that benchmark by February 2028 under the same mortgage-rate assumption, supported by declining home prices and projected income growth.
Other markets approaching their historical affordability levels include Oakland, Seattle and Portland, Oregon, where weaker home-price growth or price declines are improving the outlook.
By contrast, Redfin identified Philadelphia, Montgomery County, Boston, the New York City area, Chicago and Milwaukee among markets facing a potentially prolonged recovery.
The company attributed the slower improvement in many Northeast and Midwest markets to stronger housing demand and price appreciation relative to other regions.
For Philadelphia-area buyers, the findings suggest that affordability could remain constrained even if financing costs ease, particularly if home prices continue rising faster than household incomes.
The report’s scenarios are theoretical and should not be interpreted as predictions of future mortgage rates or housing prices.
The full analysis, including regional comparisons and methodology, is available at https://www.redfin.com/news/return-to-normal-housing-costs.
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