U.S. home buyers are now enjoying a significant boost in purchasing power due to the recent drop in mortgage rates across the country. According to a recent analysis by Realtor.com, the 30-year fixed mortgage rates have decreased from 7.79% in October 2023 to 6.2% last week. This decline has resulted in a median additional buying power of $70,000 for home buyers in the 100 largest U.S. cities, allowing them to afford homes that are $70,000 more expensive for the same $2,100 monthly payment.

Buyers in cities with the most expensive homes have experienced the most substantial increase in their spending power. For instance, in San Jose, California, buyers can now afford a home valued at $1.6 million for the same monthly payment that would have bought a $1.4 million home a year ago. With the Federal Reserve cutting its benchmark federal funds rate by 50 basis points recently, mortgage rates are anticipated to decrease even further, potentially reaching 6% or lower by 2025.

The analysis conducted by Realtor.com focused on the monthly payment for a median-priced home in the U.S., considering a 20% down payment and a 6.2% mortgage rate. By applying this method to each of the 100 largest cities, the analysis revealed how much additional buying power homebuyers now have in each local market compared to the previous year. The potential future drop in mortgage rates could lead to a further increase in buying power for homebuyers in the largest metro areas, with a projected median-priced home seeing an increase in extra buying power of up to $84,800 compared to October 2023.