Homebuyers in the United States have recently gained up to $200,000 in additional spending power after mortgage rates dropped.
Over the past years, homebuyers had diminishing spending power as mortgage rates rose, peaking at a record 7.79% in October 2023. However, mortgage rates have posted declines in recent weeks, dropping to 6.09% for the 30-year term in the week ending Sept. 19, according to Freddie Mac.
This drop in mortgage rate gives homebuyers more savings on monthly payments, which means more household spending power.
How Much Spending Power Did Buyers Gain?
Nationally, the monthly mortgage payment for a median-priced home was $2,100. That is assuming the buyer posted a 20% down payment and a mortgage rate of 6.2%, per an analysis from Realtor.com. That means buyers are paying $300 less compared to May and $340 less compared to October 2023. The analysis noted that buyers would have now gained an extra $70,000 in spending power since October last year.
The savings are larger in some metro areas, particularly those where homes are priced higher.
For example, in San Jose, where homes have a median list price of $1,399,000, today's buyers gained an additional $240,600 in spending power compared to October 2023. At the time, monthly mortgage payments were $8,000, which afforded buyers a median-priced home of $1.4 million. At the current mortgage rate of 6.2%, a $8,000 monthly payment could afford a $1.6 million home, per the analysis.
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Where Did Buyers Gain the Most Spending Power?
San Jose-Sunnyvale-Santa Clara, CA
Median List Price (as of August 2024): $1,399,000
Monthly Mortgage Payments (August 2024): $6,900
Monthly Mortgage Payments (October 2023): $7,900
Buying Power Gained Since October 2023: $240,600
Los Angeles-Long Beach-Anaheim, CA
Median List Price (as of August 2024): $1,190,000
Monthly Mortgage Payments (August 2024): $5,800
Monthly Mortgage Payments (October 2023): $6,700
Buying Power Gained Since October 2023: $201,900
San Francisco-Oakland-Berkeley, CA
Median List Price (as of August 2024): $969,000
Monthly Mortgage Payments (August 2024): $4,700
Monthly Mortgage Payments (October 2023): $6,300
Buying Power Gained Since October 2023: $191,300
Oxnard-Thousand Oaks-Ventura, CA
Median List Price (as of August 2024): $1,050,000
Monthly Mortgage Payments (August 2024): $5,100
Monthly Mortgage Payments (October 2023): $6,000
Buying Power Gained Since October 2023: $182,900
San Diego-Chula Vista-Carlsbad,CA
Median List Price (as of August 2024): $999,000
Monthly Mortgage Payments (August 2024): $4,900
Monthly Mortgage Payments (October 2023): $5,700
Buying Power Gained Since October 2023: $174,100
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