Morgan Stanley just published a report arguing that the housing market reset has already happened, and the change is structural. This isn't a warning about something coming next year. It's a description of the housing market buyers are already dealing with.
The short version is that affordability may improve from today's levels, but Morgan Stanley doesn't expect it to return to the unusually favorable levels buyers got used to after the financial crisis. If your plan is to wait for the old normal to come back, you may be waiting for something that isn't coming.
Morgan Stanley says housing affordability has reset at a higher barrier to entry. Its base case includes some improvement, but not a return to the unusually affordable post-financial-crisis years.
Existing-home sales have hovered around 4 million annually for several years, while homeowners are staying put for about 12 years. Josh and Jeb believe that lower-turnover environment is much closer to the new normal than the 5 to 5.5 million annual sales years many people still expect to return.
Morgan Stanley's long-term base case has mortgage rates moving closer to 5%, but it says the odds of rates settling closer to 6% have increased. Building your plan around another era of 3% mortgages isn't much of a plan.
Renting a starter home is currently cheaper month to month than buying in all 50 of the largest U.S. metros. That doesn't mean renting always wins over time. Zillow's full rent-versus-buy model puts the national breakeven at about six years, with enormous differences by market.
The homeownership flywheel comes from principal paydown, leverage and time. Once you own, part of every payment reduces the loan while appreciation applies to the entire value of the home, not just your down payment.
On a 30-year fixed mortgage, your note rate is a ceiling on that loan. If rates fall, you may be able to refinance, but chasing the lowest payment by repeatedly stretching the loan back to 30 years can work against the wealth you're trying to build.
The right time to buy is set by your life stage, time horizon and finances, not by a headline rate or a market bottom that may never arrive.
When Jeb and Josh read Morgan Stanley's June 2026 housing-affordability report, the thing that jumped out was how closely it lined up with what we've been telling buyers for years.
The number one question we get on the live show and by email is some version of, "Should I buy now or wait?" Our response is usually another question: Wait for what?
Morgan Stanley's answer is that buyers shouldn't count on affordability returning to where it was before this reset. That doesn't mean everyone should buy today. It means your decision needs to be based on the market that actually exists, not the one you hope comes back.
A reset means the baseline changed.
How long does that last? Seven years? Fifteen? Nobody knows, and Morgan Stanley doesn't claim to know. The point is that today's affordability problem isn't just a temporary dislocation waiting to snap back to 2019.
Morgan Stanley estimates that mortgage payments currently consume roughly 24% of household income. Its base case improves that to about 21%, but that's still well above the roughly 15% average during the unusually affordable post-financial-crisis period.
That's an important distinction. Morgan Stanley isn't saying affordability can't improve. It's saying the improvement it expects still doesn't take us back to the old baseline.
There are several other pieces that help explain the market buyers are dealing with today.
The old normal for existing-home sales was often somewhere around 5 to 5.5 million transactions a year. The National Association of Realtors says existing-home sales have now hovered just above 4 million annually for more than three years, the slowest pace since 1995.
Josh and Jeb's view is that something around today's transaction level may be much closer to the new normal than waiting for 5.5 million sales to magically return.
That doesn't mean exactly 4 million homes will sell every year. It means lower turnover may be structural rather than something that automatically disappears when rates improve a little.
When Josh started in lending in the 1990s, seven years was a common rule of thumb for how long someone would stay in a home.
Today, Redfin puts median homeowner tenure at about 12 years, up from 6.5 years in 2005.
That matters because the United States doesn't need to physically lose houses to create a supply problem. We can have roughly the same housing stock while fewer of those homes come up for sale.
People with a 3% mortgage and hundreds of thousands of dollars in equity often have very little financial incentive to move. Add the cost and hassle of selling, buying, moving and taking on today's mortgage rate, and a lot of people simply stay where they are.
Life still creates transactions. Families outgrow houses. Jobs move people. Divorce happens. Financial shocks force sales.
But the status quo is a lot stickier than it used to be.
This is another place where we need to separate Morgan Stanley's conclusion from ours.
Morgan Stanley's long-term base case still has mortgage rates moderating closer to 5%, while the firm says the probability of rates settling closer to 6% has been rising.
Our takeaway is simpler: don't build your homebuying plan around another era of 3% or 4% mortgages.
Could rates get there under the right economic conditions? Sure.
But needing 4% rates before your plan works means your plan depends on something neither you nor we can control.
The mechanism behind much of this frozen market is supply.
We have millions of homeowners who don't need to sell and aren't particularly motivated to. At the same time, people continue aging into the years when they form households, get married, have kids and start seriously thinking about owning.
Steady demand against a housing stock that turns over less often creates exactly what we've been watching: weak transaction volume without the flood of distressed inventory crash callers keep expecting.
That's an important distinction.
Four million sales sounds like a weak housing market. But fewer transactions caused by homeowners choosing not to move is very different from fewer transactions because sellers are flooding the market and can't find buyers.
If you want the fuller version of that argument, we walked through it in our breakdown of why the 2008 math doesn't apply this time.
Let's deal with the strongest counterargument because it's real.
Realtor.com's March 2026 analysis found that renting a starter home was cheaper month to month than buying one in all 50 of the largest U.S. metros. Across those metros, the average monthly ownership premium was about $920.
So someone looking at today's numbers and saying, "Renting is cheaper," isn't wrong.
It is.
The mistake is assuming today's monthly comparison tells you what the next 10 or 20 years will look like.
Rent isn't guaranteed to rise every year. Realtor.com's own data showed rents were down year over year in March 2026. But rent is a market price that resets over time. The principal-and-interest portion of a fixed-rate mortgage does not.
You also need to account for what happens to the money on both sides of the decision. A disciplined renter who saves and invests the difference can absolutely build wealth. A homeowner builds equity through principal reduction and may benefit from appreciation.
That's why simple monthly-payment comparisons only tell part of the story.
Zillow's 2026 Rent vs. Buy analysis models much more than the monthly payment. It includes equity, transaction costs, appreciation, maintenance and the opportunity cost of the renter investing the money that wasn't used for the down payment and closing costs.
Under Zillow's assumptions, the typical U.S. buyer breaks even compared with renting in about six years. In Columbus, Memphis and Buffalo, the crossover is closer to four years. In San Francisco, San Jose and New Orleans, today's prices and rents leave renting ahead even over a 30-year horizon.
Realtor.com looks at a different question. Its March analysis compares the monthly cost of buying with renting. If the rent and ownership-cost trends in place at the time continued, it estimated buying would become cheaper on a monthly basis in roughly 10 years on average across the 50 largest metros, with some markets getting there much sooner.
Different models. Different assumptions. Different questions.
But they point toward the same lesson: the premium to own today is real, but today's monthly comparison doesn't tell you what the next decade looks like.
That's why time horizon matters so much.
A flywheel takes real work to get moving. Once it's turning, momentum starts doing more of the work for you.
Homeownership can work the same way.
Saving a down payment is hard. Improving your credit score takes work. Building stable income, controlling debt and putting enough money aside to handle closing costs and still have reserves takes time.
That's the hard part.
Once you're in the home, several things begin working in the background.
Every normal amortizing mortgage payment includes principal.
At a very low interest rate, a surprisingly large percentage of the payment goes to principal immediately. At today's higher rates, the percentage starts smaller, but it increases over time as the loan amortizes.
At 6.5%, roughly 14% to 15% of the first principal-and-interest payment on a 30-year mortgage goes toward principal.
Take a roughly $2,500 principal-and-interest payment. You're starting with something around $350 to $400 a month reducing the loan balance, or roughly $4,500 to $5,000 during the first year.
The following year, more goes to principal. Then more again.
You don't wake up every month and decide whether you feel disciplined enough to save that money. You make the mortgage payment, and part of it automatically becomes equity.
That's forced savings.
The second part of the flywheel is leverage.
Most everyday Americans don't borrow hundreds of thousands of dollars to buy stocks. They invest through a 401(k), IRA or brokerage account using their own cash.
Housing is different.
Put 3.5% down on an FHA loan and you control 100% of the home. If that home appreciates, the appreciation applies to the full property value, not merely the money you put down.
On a $400,000 home, a 3.5% down payment is about $14,000.
If that house appreciates 2%, you've gained about $8,000 in value. Add roughly $4,500 of principal reduction during the first year, and you're sitting around $26,000 to $27,000 of gross equity after starting with roughly $14,000.
That's why comparing a home's raw appreciation rate with the stock market's return misses an important part of the math. You're generally not buying the home with 100% cash.
That leverage is most powerful when you give it time to work instead of depending on what the home does next year.
Go forward three, four or five years and you have more principal paid down, potentially more appreciation, and a principal-and-interest payment that hasn't changed while the rental market around you keeps resetting.
That's the flywheel.
With a 30-year fixed mortgage, the note rate you close with is a ceiling on that loan.
If rates rise, your rate doesn't.
If rates fall enough to justify refinancing, you may be able to lower it while keeping the house and all of the equity you've accumulated.
That flexibility matters.
But this is also where homeowners can undo part of the progress they've already made if nobody explains the full math.
Suppose you've already made three years of payments on a 30-year mortgage.
You've got 27 years left.
A lender shows you a lower rate and a lower payment by putting your remaining balance back into a fresh 30-year loan. The monthly payment looks better, but the payment isn't the only thing that matters.
You've just pushed your scheduled payoff date three years farther into the future.
You've also slowed the principal reduction you worked three years to build.
That doesn't mean refinancing back to 30 years is always wrong. Sometimes maximizing monthly cash flow is exactly what the borrower needs.
But it should be a deliberate choice, not something that happens because the quote with the lowest payment looked best.
Depending on the lender and product, you may be able to refinance into a 27-year term, a 25-year term, or another structure that lowers your rate without unnecessarily restarting the amortization clock.
The goal isn't just to lower the payment.
It's to improve the mortgage.
There are also ways to structure a refinance so you bring little or no cash to closing.
That's useful.
But no cash out of pocket does not mean no cost.
The costs may be covered through lender credits that come with a higher rate. They may be added to the new loan balance. Or you may be paying discount points upfront to get the rate down.
If the lender isn't showing you where those costs went and explaining the trade-off, they're not operating in your best interests.
Josh routinely sees this in refinance offers borrowers send him for a second opinion: three points buying down the headline rate, thousands of dollars being added to the loan balance, and a borrower with 28 years remaining being put back into a new 30-year mortgage without understanding what that does to the long-term math.
The quote looks better because the rate and payment are lower.
That doesn't automatically mean the loan is better.
Rate matters. But so do cost, term, principal reduction, breakeven period and what the refinance actually accomplishes.
This is exactly the kind of structuring we work through on a Roadmap call.
Neither of us has any interest in talking someone into a mortgage or a home.
Roughly 4 million existing homes are selling every year. When something happens millions of times annually, nobody needs us to manufacture demand for it.
Our job is to help the people who already want to own figure out when it makes sense for them.
The financial screen is the easy part. A loan officer can look at your credit, income, assets and debts and tell you whether the guidelines allow the loan.
We want to go beyond that.
Are you committed to the area and the type of home you're buying long enough for the economics to work?
Buying and selling real estate is expensive. If you're likely to relocate in two years, buying may create more problems than it solves.
What does the next several years actually look like?
Relationships. Marriage. Kids. Childcare. Schools. Aging parents. Career moves.
Josh recently worked with a family with two kids under four and roughly $1,500 a month in childcare expenses. In about three years, both kids would be in school and that expense could fall closer to $400.
That $1,100 monthly difference mattered.
The question wasn't just whether they qualified today. It was how they comfortably bridged the next three years.
Where is your income going?
Someone finishing an advanced degree that should add $30,000 a year to their income may have a good reason to wait.
Another person on that same trajectory may decide they're comfortable stretching a little today because they know their current income isn't representative of where they'll be shortly.
Neither answer is automatically right.
The point is to know what you're doing and why.
Do you have money left after the down payment and closing costs?
Are you comfortable with the payment as it exists today?
You cannot build the purchase around a refinance that may or may not happen.
The same goes for temporary buydowns. If the only way the payment works is because a 3-2-1 buydown temporarily puts you at 4.25%, but you're in trouble when the note-rate payment arrives, you don't have a solid foundation.
The lower temporary payment is a benefit.
It cannot be the thing making an unaffordable house look affordable.
Across more than 450 home sales, Jeb's job has never been to sell you a house. It's to keep you from buying the wrong one.
Josh's job isn't to convince you to take out a mortgage either. It's to figure out whether the financing fits your life, explain the options, and help you structure it intelligently if it does.
Buying today is genuinely hard.
Prices in many markets are dramatically higher than they were five years ago. Mortgage rates are higher. In most major metros, the monthly cost to own is substantially higher than the monthly cost to rent.
Acknowledging that isn't pessimistic. It's accurate.
But wishing you had bought in 2013 or 2019 doesn't help you make a decision in 2026.
The fact that an earlier year would have been a better time to buy does not tell you whether waiting from today is the right decision. You still have to make today's decision with today's options.
Morgan Stanley's reset argument matters because it removes one assumption from that decision: you shouldn't count on the old affordability environment returning and solving the problem for you.
Maybe conditions improve.
Maybe rates fall.
Maybe your local market softens.
Great. If those things happen, you can take advantage of them.
But your homebuying decision should work without needing them to happen.
If you're still trying to figure out whether you're even close, our 2-minute readiness quiz gives you a low-stakes place to see where you stand.
Stop guessing what you can really afford
It starts with a Discovery Call, a straight conversation about your real numbers. Josh and his team show you the price range and loan options that fit, and map out every step to closing. They handle your loan directly, never a referral, so you tour with confidence and write offers sellers take seriously.
Morgan Stanley is describing a structural reset in affordability, not forecasting a housing crash. One reason transaction volume remains so low is that many existing homeowners have inexpensive mortgages, substantial equity and little incentive to sell.
That doesn't mean prices can't decline in individual markets. They can and do. It means today's low transaction volume shouldn't automatically be interpreted as evidence that a flood of distressed sellers is coming.
Morgan Stanley's analysis suggests buyers shouldn't assume affordability will return to the unusually favorable levels of the post-financial-crisis period. Rates or prices can still improve from today's levels, but neither is guaranteed to move enough to make the decision for you.
The better question is whether your payment, cash position, time horizon and life stage make buying work today. If the purchase only works after a future refinance or a major price drop, we'd wait.
Home prices and mortgage rates rose much faster than rents during much of the last several years. Realtor.com found that in March 2026, renting a starter home was cheaper month to month than buying one in all 50 of the largest U.S. metros.
That monthly premium doesn't automatically mean renting wins over the full period you plan to live there. Zillow's more complete rent-versus-buy model, which accounts for equity and opportunity costs, puts the national breakeven at roughly six years, with huge differences between local markets.
There isn't one national answer.
Zillow's June 2026 analysis puts the typical financial breakeven at about six years nationally, with some markets around four years and a few expensive markets where renting remains ahead for more than 30 years.
Realtor.com's simpler monthly-cost analysis estimated roughly a 10-year average crossover across the 50 largest metros if the trends in place in March 2026 continued.
Your actual answer depends on the home price, rent, mortgage rate, down payment, appreciation, maintenance, transaction costs, investment returns and how long you stay.
The flywheel is the momentum that can build after you become a homeowner.
Part of each mortgage payment reduces principal, creating forced savings. At the same time, a relatively small down payment gives you exposure to appreciation on the full value of the home.
Over time, principal reduction, appreciation and a fixed principal-and-interest payment can work together to make the financial position easier than it felt when you first bought.
Yes. You don't automatically have to put a remaining mortgage balance back into a new 30-year term.
Depending on the lender and product, you may be able to choose a shorter or custom term that keeps the payoff date closer to the original schedule. Sometimes extending back to 30 years is the right decision because the borrower needs the cash-flow relief, but it should be intentional.
A refinance should be evaluated on more than rate and payment. Look at closing costs, points, the new loan balance, remaining term, breakeven period and how much principal you'll pay down over time.
No.
A lender can structure a refinance with little or no cash due at closing, but the costs still exist. They may be covered through lender credits tied to the interest rate, added to the new loan balance, or paid another way within the transaction.
The lender should be able to show you exactly where the costs went and what you're giving up in exchange.