The Homebuying Market Could Normalize Again In Five Years, But Starter Homes Are Getting Harder To Find

The U.S. housing market could become significantly more affordable over the next five years, but first-time buyers may still struggle to find homes within their budgets as the supply of starter-priced properties continues to shrink, according to two new reports.

A new analysis from Redfin found that housing costs could return to what the brokerage considers normal levels by 2031 if mortgage rates decline to 6% and annual home-price growth remains around 2.1%.

Elsewhere, a separate Realtor.com report showed that starter-priced homes accounted for 36.2% of active listings in August 2026, down from 38.1% in August 2019. Over the same period, the national starter-home price threshold jumped 30.8%, from approximately $260,000 to $340,000.

The findings present two different challenges for prospective homebuyers: the cost of financing a home and the availability of less expensive properties to purchase.

Redfin examined several hypothetical scenarios involving mortgage rates, home-price growth and household income to estimate when housing costs might return to levels seen before the pandemic.

The brokerage defined "normal" as the national mortgage-payment-to-income ratio returning to its August 2018 level of 30%. At that point, a typical homebuyer would have needed to spend approximately 30% of household income on a monthly mortgage payment.

Under one scenario, mortgage rates falling to 6%, combined with annual home-price growth of 2.1%, would bring housing costs back to that benchmark in November 2031.

If mortgage rates remain around 7.5% but home prices stop rising, the market could reach the same benchmark by April 2032.

A more favorable combination of 6% mortgage rates and flat home prices could bring housing costs back to normal by February 2029. However, if rates remain between 7% and 8% while prices continue growing, the recovery could take a decade or longer.

Redfin stressed that these scenarios are theoretical rather than predictions and depend heavily on future interest rates, home prices and income growth.

"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.

The analysis also found substantial differences between local housing markets. San Jose, California, could return to its 2018 affordability level as early as October 2027 with mortgage rates at 7.5%, supported by falling home prices and projected income growth.

Austin, Texas, could reach that benchmark by February 2028 under the same mortgage-rate assumption, followed by Oakland, California, in April 2028.

However, approximately half the metropolitan areas analyzed could take at least a decade to return to normal housing costs under scenarios in which mortgage rates remain between 6% and 8% and local home prices continue rising at their current pace.

Those markets include New York, Chicago, Boston-area communities and several Midwestern cities.

Even as overall housing affordability could improve in the coming years, Realtor.com's findings show that the supply of properties within reach of entry-level buyers has already declined.

The real estate platform examined active listings across the country's 100 largest metropolitan areas, defining starter-priced homes as properties listed at or below 80% of their local metro area's median asking price.

Starter-priced properties represented 38.1% of active listings in August 2019, but their share had fallen to 36.3% by August 2022. It remained nearly unchanged at 36.2% in August 2026.

Realtor.com estimated that the market would have more than 21,000 additional starter-priced homes available today if the share of entry-level listings had remained at its 2019 level.

Meanwhile, the national starter-home price threshold increased from roughly $260,000 in 2019 to $340,000 in 2026, despite easing from its August 2022 level of $353,000.

"Affordability is only part of the story. What matters as much is whether affordable homes are actually for sale in the places where buyers want and need to live," said Hannah Jones, senior economist at Realtor.com.

The report also found that condominiums and townhomes are becoming a larger part of the entry-level market as traditional single-family homes move beyond the budgets of many first-time buyers.

These properties represented 27.1% of starter-priced listings in August 2026, up from 18% in August 2019.

The report also found substantial differences within individual metropolitan areas. In Austin, starter-priced homes represented 32.7% of listings, but only 12 of the 80 ZIP codes analyzed were classified as starter-home dominant. Those neighborhoods were concentrated largely in the eastern and southeastern parts of the metro area.

By comparison, St. Louis and Kansas City offered above-average starter-home shares alongside a wider distribution of neighborhoods with entry-level listings.

"Despite a national market that has become less friendly to entry-level buyers, the picture is not uniformly bleak," Jones said. "The Midwest continues to offer something that is increasingly rare: meaningful starter inventory spread across enough neighborhoods to give buyers both affordability and real choice."