BAM Key Details:
- Zillow reports a median-income household can now afford a $331,483 home, up $30,302 from $301,181 a year ago as mortgage rates fell from 6.96% to 6.1%.
- Affordable listings rose to 446,982 nationwide, representing 40.3% of the market compared to 34.8% last year.
- A new Redfin report shows that buyers also have more negotiating power in many markets, with over 600,000 more sellers than buyers in the U.S.
A median-income household can now afford a $331,483 home, up $30,302 from a year ago, according to a new Zillow analysis.
That jump in buying power, driven by mortgage rates falling from 6.96% in January 2025 to 6.1% last month and an 8.4% drop in the typical mortgage payment, marks the strongest affordability level since March 2022.
It also brings roughly 82,300 more homes within reach and pushes the share of affordable listings to 40.3% of the market, up from 34.8% a year ago.
This week, rates dipped even further to 5.99%, adding another tailwind to affordability as spring approaches.
Meanwhile, Redfin just announced there are 600,314 more sellers than buyers nationally, a 44% gap and the second-largest gap on record since 2013. There are just 1.36 million buyers in the market, down 8% year over year and the lowest level on record.
In other words, buyers can afford more house than they could a year ago, and they’re shopping in a market where supply outweighs demand.
Here’s what’s going on and what your buyers need to know.
Buying Power Is Up $30,000
That $30,302 increase in buying power comes down to the fact that the cost of financing has eased up enough to change what buyers can realistically afford.
Mortgage rates averaged 6.96% in January 2025. Last month, they were down to 6.1%. Yesterday, they slipped again to 5.99%.
That drop meaningfully lowers a buyer’s monthly payment. In fact, the typical mortgage payment (with a 6.1% rate) excluding taxes and insurance and assuming 20% down, is 8.4% lower than it was a year ago.
Put that together with modest income gains and steadier home values, and a median-income household can now afford a $331,483 home, up from $301,181 a year ago.
Kara Ng, senior economist at Zillow, summed up the biggest takeaway for buyers:
“A more than $30,000 gain in buying power is meaningful for households that have been stretched thin by high rates. It can mean the difference between settling and choosing. That doesn’t suddenly make this market affordable for everyone, but it does crack open doors that had firmly shut when rates peaked.”
For context, buying power bottomed out at $272,224 in October 2023, when rates averaged 7.62%, the highest monthly average since 2000.
That means that today, a median-income household can afford roughly 82,300 more homes than it could a year ago. There are now 446,982 homes within reach nationally, compared to 364,688 last January.
Now, let’s layer in Redfin’s data.
There are currently 1.96 million sellers in the market and just 1.36 million buyers. That’s a surplus of 600,314 sellers and a 44% gap, the second-largest imbalance on record. Buyer demand is down 8% year over year and sitting at the lowest level on record.
So the math is improving at the same time competition remains muted.
In much of the U.S., along with qualifying for more house, buyers are negotiating in markets where sellers outnumber them by a wide margin.
The Biggest Buying Power Gains Are in Expensive Markets
In the priciest markets, small shifts in rates can translate into large swings in buying power.
- San Jose saw the largest year-over-year jump in buying power among major metros, with a median-income household gaining nearly $74,000 in purchasing power. Buyers there can now afford a $741,686 home, up from $667,829 a year ago. The number of affordable homes rose from 185 to 309.
- San Francisco buyers gained $56,115 in buying power year over year. The affordable price climbed to $581,564 from $525,449, and affordable listings increased from 927 to 1,119.
- In Washington, D.C., buying power rose $48,881. A median-income household can now afford a $519,441 home, up from $470,560, and affordable listings jumped from 4,028 to 6,000.
- San Diego buyers saw a $46,506 gain, lifting the affordable price to $477,571 from $431,066. Affordable listings nearly doubled, rising from 339 to 675.
- Boston rounded out the top gains with a $46,390 increase in buying power. The affordable price moved from $441,998 to $488,388, and affordable homes grew from 857 to 1,296.
But here’s where Redfin’s data adds context.
Only five of the 50 largest metros qualify as seller’s markets. Newark has 31% fewer sellers than buyers. Nassau County has 29% fewer. Milwaukee and Montgomery County each have 26% fewer. New Brunswick has 17% fewer.
Across the 39 buyer’s markets, home prices rose just 1% year over year. In the five seller’s markets, prices rose 5% on average.
That means in many high-cost metros, buyers are gaining purchasing power at the same time price growth is cooling or competition is more balanced than it was in prior years.
In other words, the rate relief is unfolding in a market where, in most regions, sellers now outnumber buyers.
Where Affordable Inventory Is Growing the Fastest
The buying power story is also about how many homes now fall within reach.
Nationally, a median-income household can afford 446,982 homes, up from 364,688 a year ago. Affordable listings now account for 40.3% of the market, compared to 34.8% last January.
Overall inventory is up 6% year over year, which is helping expand options.
Some markets stand out because more listings have moved into the “affordable” category, especially where home values have softened.
- Houston leads the country in affordable inventory growth, with just under 4,000 more listings within reach than a year ago. Affordable homes increased from 8,180 to 12,176, and the affordable price rose from $274,173 to $298,282.
- Phoenix added 3,434 affordable homes year over year. Listings within reach jumped from 4,517 to 7,951, and the affordable price increased from $363,929 to $403,247.
- Dallas saw 3,267 more homes become affordable. Inventory climbed from 7,712 to 10,979, and the affordable price rose from $319,291 to $347,681.
- Miami added 2,981 affordable listings, moving from 12,922 to 15,903 homes within reach. The affordable price increased from $276,987 to $300,704.
- Atlanta gained 2,279 affordable homes, rising from 10,272 to 12,551 listings. The affordable price moved from $330,769 to $362,571.
In several of these metros, home values have declined year over year. Combined with lower mortgage rates, that gives buyers more flexibility than they had 12 months ago and expands the range of homes that realistically fit their budget heading into spring.
Also, according to Redfin, those same metros sit in some of the strongest buyer’s markets in the country.
- Miami has 159% more sellers than buyers
- Fort Lauderdale (128%)
- Austin (124%)
- Nashville (120%)
- San Antonio (114%)
The South overall has 68% more sellers than buyers, and the West has 48% more.
Buyers in these markets are browsing in environments where options are expanding and competition is thinner than it was when rates were above 7%.
What This Means Heading Into Spring
The biggest shift here is that buyers who were right on the edge of qualifying last year may now clear the bar.
At 7% or higher, a small rate increase knocked entire price tiers out of reach. At 6.1%, some of those tiers come back into play. In higher-cost markets, that swing can equal $40,000 to $70,000 in added purchasing power. In markets like Houston, Phoenix, and Dallas, it means thousands of additional listings now fit inside a median-income budget.
Time will tell if this week’s dip below 6% holds (last time it held out for less than a day).
In any case, today’s more buyer-friendly market is changing search behavior. Buyers who were filtering at the top of their budget may widen their criteria. Some renters who paused in 2023 could reenter the conversation. And households that were “almost there” financially may now qualify without stretching beyond 30% of income on the mortgage payment.
That creates a more functional market than the one buyers faced when rates peaked at 7.62% in October 2023.
If rates keep drifting lower through 2026 as Zillow expects, incremental improvements like this could keep building momentum.
