Mortgage rates fall, home buyers gain additional spending power

Falling mortgage rates are increasing the purchasing power of American home buyers by thousands.

30-year fixed mortgage rates have dropped from 7.79% in October 2023 to 6.2% last week, according to a Realtor.com analysis, giving homebuyers in the 100 largest U.S. cities an average of $2,100 in additional purchasing power on the same $70,000 monthly payment.

In other words, an American buyer can now purchase a house that is $70,000 more expensive than last year.

The findings are based on a monthly payment for the median-priced home in the U.S., a 20% down payment and a 6.2% mortgage rate. The analysis applied the same method to each of the 100 largest cities, calculating how much additional purchasing power homebuyers have in each local market compared to last year.

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Perhaps not surprisingly, the cities with the most expensive homes saw the biggest increase in buyers' spending power. In San Jose, California, for example, buyers can now purchase a $1.6 million home for the same monthly payment they could afford a $1.4 million home a year ago, according to Realtor.com.

These savings will likely grow, too. With the Federal Reserve cutting its benchmark federal funds rate by 50 basis points last week, mortgage rates are projected to fall to 6% or less sometime in 2025.

If that happens, the additional purchasing power for homebuyers in the 100 largest metro areas would increase to $84,800 for a median-priced home compared to October 2023, according to the analysis.

Here are the 15 metro areas with the biggest increase in buying power based on 6.2% and 6% mortgage rates. Buying power is how much more home a buyer can purchase in each market compared to October 2023.

• October 2023 average list price: $1,380,694
• Additional purchasing power with 6.2% rate: $240,556
• Additional purchasing power with 6% rate: $275,489

• October 2023 average list price: $1,159,000
• Additional purchasing power with 6.2% rate: $201,931
• Additional purchasing power with 6% rate: $231,254

• October 2023 average list price: $1,098,000
• Additional purchasing power with 6.2% rate: $191,303
• Additional purchasing power with 6% rate: $219,083

• October 2023 average list price: $1,050,000
• Additional purchasing power with 6.2% rate: $182,940
• Additional purchasing power with 6% rate: $209,506

• October 2023 average list price: $999,000
• Additional purchasing power with 6.2% rate: $174,054
• Additional purchasing power with 6% rate: $199,330

• October 2023 average list price: $889,225
• Additional purchasing power with 6.2% rate: $154,928
• Additional purchasing power with 6% rate: $177,426

• October 2023 average list price: $837,374
• Additional purchasing power with 6.2% rate: $145,894
• Additional purchasing power with 6% rate: $167,081

• October 2023 average list price: $798,750
• Additional purchasing power with 6.2% rate: $139,165
• Additional purchasing power with 6% rate: $159,374

• October 2023 average list price: $792,250
• Additional purchasing power with 6.2% rate: $138,032
• Additional purchasing power with 6% rate: $158,077

• October 2023 average list price: $729,444
• Additional purchasing power with 6.2% rate: $127,090
• Additional purchasing power with 6% rate: $145,545

• October 2023 average list price: $649,000
• Additional purchasing power with 6.2% rate: $113,074
• Additional purchasing power with 6% rate: $129,494

• October 2023 average list price: $635,000
• Additional purchasing power with 6.2% rate: $110,635
• Additional purchasing power with 6% rate: $126,701

• October 2023 average list price: $619,995
• Additional purchasing power with 6.2% rate: $108,021
• Additional purchasing power with 6% rate: $123,707

• October 2023 average list price: $599,995
• Additional purchasing power with 6.2% rate: $104,536
• Additional purchasing power with 6% rate: $119,717

• October 2023 average list price: $599,950
• Additional purchasing power with 6.2% rate: $104,528
• Additional purchasing power with 6% rate: $119,708

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