Americans hoping for an 08-style housing crash to afford a home are out of luck

Those holding out hope for a housing crash are setting themselves up for disappointment.American home prices would need to plunge nearly a third to make today’s punishing mortgage rates as affordable as the loans millions of existing homeowners are sitting on.The median US home sold for $429,100 in August, but at today’s mortgage rates, that price would have to tumble 32% to about $291,181 for a new buyer’s monthly payment to match that of the typical current mortgage holder, according to a new Barron’s analysis.To put that staggering figure in perspective, US home prices fell about 27.5% from their 2006 peak through September 2010 amid the housing crash and financial crisis, according to Federal Reserve data — meaning a 32% plunge would be even worse.Nadia Evangelou, director of research at the National Association of Realtors, told Barron’s she doesn’t expect prices to fall by anything close to that amount.The brutal math illustrates just how dramatically the surge in borrowing costs has reshaped the housing market — and why homeowners who locked in rock-bottom rates during the pandemic have so little incentive to move.The typical existing mortgage holder has a 3.88% rate and pays $1,597 a month, according to ICE Mortgage Technology data cited by Barron’s.But mortgage rates have recently surged to around 7.3%.At that rate, a buyer putting 20% down on the $429,100 median-priced home would face a monthly principal-and-interest payment of about $2,353 on a 30-year mortgage, Barron’s calculated.That’s $756 more every month — or roughly 47% higher — than the median payment shouldered by current mortgage holders.To get that payment back down to $1,597 without a drop in rates, the home’s price would need to sink to roughly $291,181.The enormous gap helps explain the so-called mortgage-rate lock-in effect that has dogged the housing market since borrowing costs began climbing.Millions of Americans refinanced or purchased homes when mortgage rat...