As mortgage rates continue to plummet, American homebuyers are reaping the benefits of increased purchasing power. A recent analysis reveals that the median buyer in the 100 largest US cities can now afford a home worth $70,000 more than they could last year, thanks to the drop in 30-year fixed mortgage rates from 7.79% in October 2023 to 6.2% last week.
This significant boost in buying power means that for the same monthly payment of $2,100, homebuyers can now consider properties that were previously out of their budget. The analysis, which assumes a 20% down payment and a 6.2% mortgage rate, found that buyers in cities with the highest-priced homes saw the greatest increase in their spending power.
San Jose, California, for instance, saw a notable surge, with buyers now able to afford a home worth $1.6 million for the same monthly payment that would have only secured a $1.4 million property last year. As the Federal Reserve continues to cut interest rates, mortgage rates are expected to decline further, potentially reaching 6% or lower by 2025. If this forecast holds true, homebuyers in the 100 largest metro areas could see their buying power increase by as much as $84,800.
The top 15 metro areas where buying power has increased the most are:
* San Jose, CA: +$200,000
* San Francisco, CA: +$180,000
* Seattle, WA: +$140,000
* New York City, NY: +$130,000
* Los Angeles, CA: +$120,000
* Washington, D.C.: +$110,000
* Boston, MA: +$100,000
* Denver, CO: +$90,000
* Miami, FL: +$80,000
* Oakland, CA: +$70,000
* Portland, OR: +$60,000
* Austin, TX: +$50,000
* Dallas, TX: +$40,000
* Chicago, IL: +$30,000
* Minneapolis, MN: +$20,000
As the housing market continues to shift, savvy buyers are taking advantage of these favorable conditions to secure their dream homes.
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