Housing affordability in the United States has hit record lows, with buyers pushed to the sidelines amid soaring home prices. Even as mortgage rates dipped in recent weeks, an expert predicted that homes will only become affordable again in 2030.
That is according to Goldman Sachs analyst Vinay Viswanathan, who shared the bank's forecast in a recently published report. The analyst noted that home prices will likely increase a further 4.4% in 2025, up from a previous estimate of 3.2%. If that happens, it will become US history's most affordable housing market.
"By almost any estimate, affordability is the worst right now than it's been for as long as we have data on record - so since the early 1980s," Viswanathan said.
However, he added that they forecast relief for buyers in 2030, noting that prices will return to "normal levels" by then.
How Will Housing Affordability Improve?
In the report, the bank forecasted several things to happen over the next five years that will improve housing affordability. First, they expected the Federal Reserve to make additional rate cuts in 2025. That would follow a 0.50% cut on its interest rate this year.
Read also: Fed Rate Cuts Will Lower Mortgage Rates but Won't Fix the US Housing Affordability Crisis: Report
Experts believe mortgage rates would fall at the same rate as the cut. If the Feds make another half-point cut, that means rates from the 30-year mortgage could fall to 6.03% from the current 6.08%. The Fed will meet again on Nov. 6 and 7.
Second, the bank expects wages in the US to grow and exceed inflation in the coming years. This would give Americans more buying power and put them in a better position to purchase a home.
Lastly, Goldman Sachs expects home prices to continue rising but slower. As of August, the median home sale price of a home was $434,050, which increased 3.2% year-over-year.
Can Housing Affordability Improve Today?
Apart from the five-year improvement, Goldman Sachs said the US housing affordability could get better immediately---but only if home prices fell by 20% over a year. Otherwise, affordability would slowly return to normal levels in the years leading to 2030.
