America’s Housing Affordability Challenge to Persist Until 2026, Warns BofA

Last updated: June 26, 2024

Couple getting the keys to their homeBank of America predicts that the housing market’s pandemic-driven surge will maintain momentum, with prices forecasted to rise 4.5% to 5% annually through next year. Looking ahead to 2026, a slower 0.5% growth is expected as pandemic influences wane, though a 5% increase remains plausible under continued impactful conditions.

“While home prices may stabilize after reaching new highs, the era of rapid appreciation may diminish,” analysts explained, citing recent data showing a 46% increase in prices since January 2020.

The financial strain on first-time home buyers has doubled in four years, according to a March Redfin report, highlighting the ongoing affordability challenge exacerbated by pandemic-related distortions. Bank of America suggests that significant improvements in affordability are unlikely until after 2025, when market adjustments may allow for more balanced growth based on fundamental housing factors.

However, persistent high mortgage rates continue to deter home sales and could prolong the market’s “lock-in effect” for the next 6 to 8 years. This phenomenon, where homeowners are reluctant to move due to financial constraints, poses a continued hurdle to improving affordability even if broader interest rates decline.

In summary, while the housing market shows resilience and potential for growth, challenges in affordability persist amid evolving economic conditions and mortgage dynamics.

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Jon Morgan, MBA, LLM, has over ten years of experience growing startups and currently serves as CEO and Editor-in-Chief of Venture Smarter. Educated at UC Davis and Harvard, he offers deeply informed guidance. Beyond work, he enjoys spending time with family, his poodle Sophie, and learning Spanish.
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