It hasn’t been cheap to buy a house in decades, if ever, but the Pandemic Housing Boom started a huge run-up in prices as remote and hybrid work expanded the map for millions of Americans—many of them millennials entering peak homebuying age. The Zoom towns boomed, and prices followed.

But 2022 shocked many of the 40-and-under crowd as mortgage rates went from the 3% range to more than 7% in the blink of an eye, yet decades of underbuilding kept a floor under prices. Now a housing industry executive has put a figure on just how bad it’s gotten.

With mortgage rates hitting a multi-decade high at 7.49%, Andy Walden, vice president of enterprise research for ICE Mortgage Technology, has done some calculations. A vice president of data and analytics for years with real estate data firm Black Knight, before it was recently acquired by ICE, Walden knows the mortgage market inside and out, leading the creation of a monthly Mortgage Monitor that breaks down trends in housing finance. He calculates that U.S. incomes would have to increase a whopping 55% for the housing market to be considered affordable. 

“If you look at home affordability itself and what it would take to normalize the market today,” he told Kelly Evans of CNBC’s The Exchange, “it’s a 35% correction in price, or a 4% decline in [mortgage] rates, or a 55% growth in income—some combination of those.”

But just imagine house prices falling 35% or your boss giving you a 55% raise. Not likely, right? “Those are massive movements that we’re talking about,” Walden said. “None of them are going to happen in a vacuum. None of those one single factors is going to make the move.” 

Other housing industry experts share Walden’s view. In other words, don’t hold your breath for mortgage rates or home prices to go down anytime soon.

“Unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “These headwinds are causing both buyers and sellers to hold out for better circumstances.”

For reference, Americans earn an average of $4,600 per month, according to August 2023 data from CEIC. However, one-fourth of new buyers are paying at least $3,000 in average monthly principal and interest payment on a 30-year fixed rate loan in July 2023, according to Black Knight. For some buyers, that’s a difference of $800 to $1,000 per month more on mortgage payments.

Plus, some homeowners could be spending more than 60% of their paychecks on their mortgage alone. As a result, fewer hopeful homebuyers are hitting the market.

“Demand has hit its lowest point during the pandemic over the last three weeks, certainly kind of constraining the market and affordability at its lowest level in 40 years,” Walden told CNBC. “You’re seeing this constrained demand and further constraint expected from these rising rates.” 

He continued: “But the big question when it comes to how will the market react is what’s inventory going to do? Are we going to see any kind of inventory building here over the next few months?” he questions. “If so, yeah, it could cool prices down. If not, you’re going to just see this stalemate play out in the market.”

While it’s easier to understand that high home prices continue to lock potential buyers out of the housing market, the stickier problem is a lack of inventory. There’s been a very slight increase in new listing inventory, according to Zillow, but it’s unlikely to be enough to ease the pressure on new buyers. Between July and August, new listings increased 4%. 

That shows some signs of recovery when compared to the 12.7% year-over-year decline versus a 25.6% year-over-year decline in July. Jeff Tucker, a senior economist with Zillow, says, though, that this slight uptick in new listings by no means indicates that a “drought” of inventory is behind us. 

“This is not a bonanza or glut of new listings, by any means,” he wrote in a late September report.

Walden calls it an “above seasonal average growth in inventory,” and something worth watching during the next few months. 

“We’ll be watching that inventory data really, really closely,” he said. “That’s really going to tell us where home prices are going late this year.”