In February 2026, mortgage rates fell below 6% for the first time in three and a half years, briefly pushing housing affordability to its most favorable level since 2022, FreddieMac reported.
That window of relief evaporated within weeks, as rates climbed back toward 6.5% and have stayed above 6% ever since.
A detailed analysis from Morgan Stanley offers a sobering look at why that brief dip in mortgage rates may have been as good as it gets for homebuyers.
The firm's research team modeled affordability under three mortgage rate environments, and none shows conditions returning to pre-2022 levels.
Sarah Wolfe, a senior economist and strategist at Morgan Stanley Wealth Management, examined what happens to affordability when mortgage rates settle at 4%, 5%, or 6%.
In every case, monthly carrying costs stay well above the levels that defined the two decades of affordability before 2022, Wolfe noted in the firm's June 16, 2026, report.
Under the firm's base case, rates moderate toward 5% over time, which would lower mortgage payments from 24% of household income to roughly 21%.
That figure still exceeds the approximately 15% average that prevailed in the years following the 2007-2009 financial crisis, the report found. Even in the most optimistic 4% scenario, affordability improves only modestly and remains above pre-2022 norms.
At 6%, which the firm views as increasingly likely, the model shows affordability gains barely materializing over the next several years.
Purchasing a median-priced home today has a monthly payment of roughly $2,000, approximately double the cost from just five years ago, Morgan Stanley Research estimated.
Between 1990 and 2021, housing was less affordable than current conditions only about 15% of the time, making even today's levels historically tight, the firm stated.
The same rate environment squeezing buyers has simultaneously frozen sellers in place, restricting inventory in a cycle that feeds on itself nationwide.
Roughly 70% of existing homeowners hold mortgage rates below 5%, and one-half have locked in rates under 4%, the Morgan Stanley report found.
For those households, selling a home and purchasing one at rates near 6.5% would mean absorbing a dramatic increase in monthly costs.
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