Housing Market Forecast: 6+ Years for "Normal" 🏠

What This Video Is About

The video discusses the current state of the housing market, focusing on the issue of low affordability. It highlights three key factors determining housing affordability: real wage growth, mortgage rates, and home prices.

Major Ideas Discussed

• The housing market is currently not normal due to low affordability, which is determined by real wage growth, mortgage rates, and home prices.
• To improve affordability, at least one of these variables needs to improve.
• Wage growth: 33% inflation-adjusted wage growth is needed to reach historic levels of affordability, which would take 42 years at the current growth rate.
• Mortgage rates: Rates would need to average 4% to reach historic affordability, which is possible but not currently expected.
• Home prices: A 25% decline in home prices is needed to reach historic affordability, which is possible but less likely given the current risk landscape.
• Improving affordability will likely require a combination of these factors, with possible scenarios including rates decreasing to 6%, prices declining 2% per year, and 2% wage growth.

What to Watch Next

The speaker suggests that normal levels of housing affordability are unlikely to return soon, unless a significant event upends the economy. It's possible that we may be entering a permanently higher housing cost era, and some improvement in affordability is needed for the housing market to become healthier.