A turning point for Boston condo buyers

By mid-2022, housing affordability reached its most challenging level in nearly 40 years. At its peak, housing expenses consumed more than 42% of median household income, well above the 30% threshold economists consider sustainable. But we’re starting to see that ratio begin to ease.

How does affordability return? Some observers expect a sharp price correction like we saw during the Great Financial Crisis in 2008. However, there may be a different path, one that’s already underway in much of the country.

Flat prices: The mechanism for recovery

Our base-case forecast for 2026 calls for home prices to be essentially flat, up just 0.5% nationally, with a plausible range from modest declines to modest gains. This marks a significant departure from the previous era, when prices rose relentlessly even as home sales stayed low.

The math behind gradual improvement

Here’s the encouraging news: Boston condo prices don’t have to fall for affordability to return. Affordability is a ratio of price to income. If prices stay flat while incomes rise, the math gradually improves.

This process is already happening. In much of the country, home prices have been flat or declining for three years while incomes have grown at roughly 4% annually. At that pace, the market returns to traditional affordability levels within several years, even without dramatic mortgage rate relief.

Consider this timeline: After peaking above 5x income in 2022, the price-to-income ratio is already easing. Our forecast shows it dropping to around 4.9x by the end of 2026. With continued income growth and flat prices, the market moves closer to the 4x threshold that historically signals a more balanced, affordable environment. We’re not there yet, but the direction has shifted.

We’re already three years into this process. And now, any sustained drop in mortgage rates accelerates the affordability timeline considerably.

The lock-in effect is fading

There’s another positive development for market activity: the mortgage rate lock-in effect is finally starting to fade. By the end of 2025, there will be more American homeowners with mortgages above 6% than those with ultra-cheap loans below 3%.

As of Q4 2025, the average interest rate on outstanding mortgages is 4.4%, the same level it was at the end of 2019. Nearly 20% of mortgages now carry rates above 6%, and that share grows with every new home purchase.

These homeowners behave very differently from those locked into 3% rates. They’re more willing to move and more willing to sell. In 2026, roughly 10 million homeowners will have mortgages above 6%, creating a growing pool of potential sellers who won’t feel anchored in place. This unlocks mobility and supports a healthier transaction environment in this next era for the housing market.

The new era takes shape

Our base case: affordability improves gradually through flat prices and rising incomes. American homeowners still have record equity, low delinquency rates and strong balance sheets. We’re watching a market slowly finding its new equilibrium.

For buyers, this means 2026 offers improved conditions compared to recent years, particularly in Sun Belt metros with elevated inventory. For sellers, realistic pricing from day one matters more than ever. For the broader market, patience is rewarded. The trajectory is finally moving in the right direction.