Can policymakers solve the housing affordability crisis in 2026?

"According to Fannie Mae calculations, it would take one of three things, or a combination of them, for affordability to return to 2016-2019 levels: The median price of a single-family home would need to fall 38% to $257,000 from September's $414,340; median household income would have to rise more than 60% to $134,500; or the mortgage rate would need to fall to 2.35% from roughly 6.5%."

"Homeowners do not want to see home prices fall nearly 40%, even though prospective buyers might welcome it. One person's gain would come at the cost of another's substantial loss of wealth. Wage growth is likely the most constructive path to improved affordability but also the one most difficult to achieve. Mortgage rates returning to 3% would address part of the problem, but if rates were to fall from roughly 6% to 3% quickly, it would likely signal a deep and painful recession."

"While home-price appreciation has created challenges, it has also opened new opportunities. Home equity loan (HELoan) and home equity line of credit (HELOC) originations are at 10-year highs as many rate-locked homeowners tap into accumulated equity. Roughly 40% of homeowners own their homes free and clear, and nearly anyone who originated a loan before 2021 has seen substantial appreciation. This has allowed nonbank and depository lenders to revisit first- and second-lien HELOC and HELoan programs."

Fannie Mae calculations show affordability would require a 38% drop in median single-family home price to $257,000, a more than 60% rise in median household income to $134,500, or mortgage rates falling to 2.35% from roughly 6.5%, or a combination of those outcomes. As 2026 approaches, affordability metrics have not improved, making a return to 2016–2019 levels unlikely without significant intervention. A nearly 40% home-price decline would inflict large wealth losses on current homeowners. Rapid mortgage-rate declines to around 3% could imply a deep recession. Rising wages offer the most constructive path but remain difficult to achieve. Meanwhile, home-price gains have enabled HELOC and HEloan originations to reach decade highs as many homeowners tap accumulated equity; roughly 40% of homeowners own homes outright.

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