REPORT: How can the U.S. surpass pandemic-era housing unaffordability

Editor’s Note: The above video shows KXAN News’ top morning headlines from Thursday, Aug. 22, 2024.

AUSTIN (KXAN) — Years after a housing unaffordability "boom" emerged during the coronavirus pandemic, research analysts with the Federal Reserve Bank of Dallas are giving new insight into how housing attainability could bounce back.

The analysis considered both market-based and private forecasters' expectations that believe the U.S. might soon reach a turning point in housing expenses.

"U.S. income growth and, more broadly, the robust U.S. labor market are expected to alleviate the pandemic-era excesses that led to rapidly deteriorating affordability," the analysis read.

Perspective from futures investors anticipate "nominal house-price growth rather than the severe correction feared by many," with experts pointing to the U.S. economy's strength, particularly since 2023. The economic stability comes even amid substantially increased interest rates over the past 20 years, the report added.

An April 2024 analysis predicts a smaller, gradual decline in house prices between February 2022 and February 2029, with an estimated 3% decrease anticipated.

Following a spike in housing prices during the pandemic, officials said that interest rates — while still higher than pre-pandemic volumes — have lowered since, which could also alleviate some cost burdens on prospective buyers. However, experts said that would likely only contribute to a small portion of cost relief, given that prices aren't expected to drop substantially.

Aside from interest rates, the report said personal disposable income is another correction opportunity to improve housing affordability.

"Putting it all together, the affordability correction in the U.S. is not expected to arise from a house-price bust but rather from strong income growth in a scenario with moderate house-price appreciation that slightly trails inflation," the analysis read.

More details from the analysis are detailed online.