Homebuyer Purchasing Power has climbed to its highest level since 2022. Lower mortgage rates and rising incomes have expanded affordability nationwide. Analysts say the shift offers relief after years of strained housing budgets.
A new report from Zillow shows measurable gains for buyers. The typical median income household can now afford a $331,483 home. That calculation assumes a twenty percent down payment and excludes taxes and insurance.
Researchers found that average mortgage payments have dropped significantly over the past year. Payments now run about 8.4% lower than twelve months ago. Consequently, Homebuyer Purchasing Power has improved for many middle-income families.
Mortgage rates declined from 6.96% in January 2025 to 6.1% last month. At the same time, household incomes have increased steadily. Together, those shifts added roughly $30,302 in buying power compared with last year.
Kara Ng, senior economist at Zillow, described the improvement as meaningful. She noted that the added flexibility helps families avoid difficult compromises. However, she cautioned that affordability challenges still persist in many markets.
Zillow data indicates purchasing power now matches levels last seen in March 2022. At that time, mortgage rates remained below five percent. Conditions later worsened as borrowing costs climbed sharply.
The weakest affordability point occurred in October 2023. During that month, median-income households could afford only a $272,224 home. Mortgage rates averaged 7.62%, marking the highest monthly average since 2000.
Recent rate declines have delivered the greatest benefits in high-cost regions. In San Jose, buyers gained nearly $74,000 in purchasing power year over year. That increase ranked as the largest among major metropolitan areas.
Buyers in San Francisco gained $56,115 in additional purchasing strength. Meanwhile, households in Washington, D.C.saw gains approaching $48,881. Other major improvements occurred in San Diego and Boston.
Affordable inventory has also expanded compared with last year. Zillow counted about 447,000 listings within reach of median-income households in January. Those properties represent roughly 40.3% of total homes on the market.
That share increased from 34.8% one year earlier. Therefore, Homebuyer Purchasing Power now extends across a broader selection of properties. Markets with slight home value declines have contributed significantly to this shift.
Houston recorded the largest increase in affordable inventory, adding nearly 4,000 qualifying homes. Gains also appeared in Phoenix, Dallas, Miami and Atlanta. Analysts say continued rate stability could further strengthen market accessibility in the coming months.
