High mortgage rates significantly slowed the housing market after reaching a peak of 7.79% nearly a year ago, but recent declines are now enhancing buying power.
Last week, mortgage rates dropped to 6.2%, the lowest since February 2023.
This decrease of over one percentage point since May has “dramatically improved buying power across the U.S., further bolstered by easing prices in some areas,” noted Hannah Jones, Realtor.com® senior economic research analyst, in her latest report ahead of the Federal Reserve’s anticipated rate cut.
On Wednesday, Fed Chair Jerome Powell is expected to announce the cut after stating last month that the “time has come” following rates hitting a 23-year high. Although the Fed does not set mortgage rates, both numbers often move in tandem—this much-anticipated rate cut should invigorate the sluggish real estate market.
The typical monthly payment at today’s 6.2% mortgage rate on a median-priced home is roughly $2,100, assuming a 20% down payment and excluding tax and insurance. Considering both home price and mortgage rate shifts, this represents a $340-per-month improvement compared to when rates peaked in October 2023.
“Put another way,” explains Jones, “a buyer who budgeted to buy the typical home in 2023 now has an extra $70,000 in home purchasing power for the same monthly cost.”
Metros with the biggest boost in buying power
The country’s highest-priced metros have seen significant savings from falling mortgage rates. These areas also experienced declines in listing prices from October 2023 to August 2024.
Five of the ten metros where buying power has increased most are in California, with San Jose topping the list.
Below are the top ten metros with substantial boosts in buying power:
San Jose, CA
August 2024 median list price: $1,399,000
August 2024 monthly payment (at 6.2%): $6,900
October 2023 monthly payment (at 7.79%): $7,900
Boost in buying power since rates peaked: +$240,600
Los Angeles, CA
August 2024 median list price: $1,190,000
August 2024 monthly payment (at 6.2%): $5,800
October 2023 monthly payment (at 7.79%): $6,700
Boost in buying power since rates peaked: +$201,900
San Francisco, CA
August 2024 median list price: $969,000
August 2024 monthly payment at (6.2%): $4,700
October 2023 monthly payment at (7.79%): $6,300
Boost in buying power since rates peaked: +$191300
Oxnard CA
August 2024 median list price: $1050000
August 2024 monthly payment (at 6.2%): $5100
October 2023 monthly payment (at 7.79%): $6000
Boost in buying power since rates peaked:+$182900
San Diego CA
Augus t 2024 me di an li st pr ic e :999 ,0
Au gus t 20****24 mon th ly pa y men t at(62)4900
Oc tob er ***203 mont hly pay ment ***(77 )5700
Bo ost **in bu yin g pow er sin ce rat es pea ked**+17410
Bridgeport CT
Aug ust **204 med ian lis t pri ce*80000
Augu st ****204 mon thl y pa y men tat62*3900
Oct ober ****203 mon thl y pa ym ent at77*5100
Boo st *in bu yin g pow er sin ce rat es pea ked+15490
Boston MA Augu st *204 medi an l ist pric e83450 Augu st *204 mont hly paym ent *at62*410 Octo ber **203 mont hly paym ent *at77*480 Boo st **in bu yin g pow er sin ce rat es pea ked+14590
Honolulu HI Aug ust ***204 med ian l ist pri ce72500 Augu st ***204 mont hly pa y men tat62*360 Octo ber ***203 mon thl y pa ym ent at77*460 Boo st *in bu yin g pow er sin ce rat es pea ked+139200
Seattle WA Augu st ****204 medi an l ist pric e77500 Augu s***204 mon th ly paym en tat62*380 Octo ber ****203 mon th ly paym en tat77*460 Boo s*tin buy ing pow er sin cer ate spe ake d+13800
New York NY Au gust ****204 med ian l ist pri ce75000 Au gust *****24 mo nth ly p ay men tat62***370 Oct obe r *****23 mo nth ly p ay ment att77**420 Bo ost tin buy ing po wer sinc erat esp ea ke d12710
