PMG’s affordability principal Dan Coakley talks to Fox News Digital about what it might take to make housing affordable again across the country.
For years, home buyers have been told that the housing market will eventually “normalize” — meaning that if mortgage rates fall or inventory improves, affordability will return to something like pre-pandemic levels in 2019.
But new data from Realtor.com suggests that version of the market may never recover, and a return to pre-pandemic buying will require results that economists say are extremely unlikely.
The numbers underscore a stark truth for consumers, one expert says: America’s housing affordability problem is not just cyclical but mostly structural.
“It’s not a realistic estimate. I think the problem in the housing market is a structural problem that’s been going on for decades,” PMG Affordable principal Dan Coakley told Fox News Digital.
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“Although it may seem that things were more affordable in 2019, this kind of march towards lack of money has been going on for a long time,” he continued. “And it will take a long time to finish it.”
A worker attaches panels to the roof of a new KB Home unit in Phoenix, Arizona. (Getty Images)
“I don’t think affordability is going to go back to where people feel it’s manageable.”
For the US housing market to feel affordable again, a recent report by Realtor.com found that it would need mortgage rates to drop to about 2.65%, median household incomes to rise by about 56%, or home prices to fall by about 35%. Realtor.com defines “affordable” as a mortgage payment equal to about 21% of the median household income, compared to more than 30% currently.
“How strong those moves can be in relation to interest rates or house price declines or income increases, it just shows how much work we have to do,” Coakley responded. “I have to commend the Trump administration now for putting this in the spotlight, because I think it’s really going to be needed, and moving all these instruments as far as we can will be very, very important.”
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Coakley added that he doesn’t see rates falling nearly 3% or close to that level, while noting that median incomes haven’t kept pace with rising taxes and home prices.
“People in the low income levels or the middle income levels, even the high and middle income levels, could not reach and participate in that appreciation of the level of property that was so important to the American dream and that which drives the total value of the people,” he explained.
“Increasing resources is probably one of the most important things that we can do and that the administration can encourage to help with this problem,” Coakley said. “The same measures – incentives, [subsidies] encouraging the developer to build an affordable commercial product – would be very welcome in this industry.”
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Efforts to fix one side of the equation often backfire, Coakley said, because housing is at the intersection of income, wages and long-term price trends that have outstripped income.
As of Tuesday, the 30-year mortgage rate in the US was 6.037%. | Getty Images
“You’re playing with one lever and you’re lowering interest rates too much, that’s probably an indication that the economy is unhealthy – and incomes won’t keep up with the inflation that could result,” he said.
Last week, the Trump administration proposed two major federal housing policies that Coakley said he was optimistic about: directing Fannie Mae and Freddie Mac to buy up to $200 billion in mortgage bonds and lifting restrictions on large institutional investors buying single-family homes.
“Politicians on both sides must be able to support each other [this],” said the home builder. “I think those are the kind of big structural steps, really, combined with other things, that can move the needle… It might encourage people psychologically to have an administration that understands what’s right and wrong.”
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Looking at the housing horizon, Realtor.com estimates that if mortgage rates hold a mid-6% range and wages and prices grow at a pace of 2025, a return to pre-pandemic buying could be delayed until 2047 – underscoring the depth of the challenge.
Coakley ultimately argues that the rush to the past is a mistake and that policymakers and the broader real estate industry should focus on restructuring the housing cost structure for long-term affordability.
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PMG’s Affordable Housing Principal and Lehman Brothers alum Dan Coakley talks to Fox News Digital about why now is the time for the White House to declare a housing emergency.
“I think we’re at risk of making this level of affordability, a catastrophic problem we have,” he said. “Ideologically, it’s not good for creating families, it’s not good for creating job opportunities. It’s not good for our cities, and our communities.”
“You can abandon the policy of the interest rate, but in fact, we need to go back to the table with ways to reduce costs in real estate… I think I’m starting to think about ways to develop new programs that help the same affordable houses, but that can’t be sold, and where people don’t feel like they’re participating in the height of their most important or maybe the biggest asset in their thinking, I think it will be an important plan.”
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