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

A new report from Oxford Economics indicates that the U.S. housing market will likely remain unaffordable for at least the next seven years, despite potential drops in interest rates or flattening home prices. The study highlights that affordability is being constrained by a combination of high mortgage rates, rising insurance costs, and a persistent shortage of over 2 million housing units. This prolonged recovery period suggests significant ongoing challenges for prospective homebuyers and the broader real estate industry as market fundamentals struggle to realign with household incomes.

According to Oxford Economics, the path to housing affordability is hindered by a complex mix of household income shifts, home prices, and mortgage rates. The firm’s Housing Affordability Index was recorded at 77.9 for the first quarter of 2026, with projections suggesting a seven-year timeline before the market swings back toward an affordable state. This forecast is notably more pessimistic than models from the National Association of Realtors (NAR) because Oxford incorporates a broader range of expenses, including property taxes, homeowners insurance, and homeowner association fees. Additionally, Oxford utilizes U.S. Census Bureau data to estimate a median household income of $81,604, which is significantly lower than the $101,360 figure used by NAR.

Rising homeowners insurance rates, particularly in high-impact states like Florida, are a major factor dragging down affordability. Nancy Vanden Houten, U.S. lead economist at Oxford Economics and author of the report, noted that the national index would jump from 77.9 to 83.5 if insurance costs were excluded from the calculations. Beyond carrying costs, a severe supply crunch continues to pressure the market, with the U.S. currently facing a deficit of more than 2 million housing units. Vanden Houten emphasized that while increased turnover of existing homes would help unlock supply, it would not resolve the underlying shortage of total units available to buyers.

Market data shows that the turnover rate for existing owner-occupied homes has averaged just 4.7% over the past year, a level reminiscent of the 2009-2012 global financial crisis and nearly half the 8% turnover rate seen in 2020. While Mark Fleming, chief economist at First American, observes that affordability is technically moving in the right direction, he warns that the progress is slow and uneven. Although 91 of the 100 largest U.S. markets saw slight affordability improvements between February and March, recent rebounds in mortgage rates demonstrate that these gains remain highly vulnerable to shifts in the broader economic environment.