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Falling mortgage rates and modest income gains have given U.S. homebuyers a rare boost: a typical household can now afford a noticeably pricier home than it could a year ago. Zillow’s latest report shows the shift is widening access in many markets, though affordability challenges remain for those stretched by high costs.
Zillow found that a **median-income household** can now comfortably purchase a home worth about $331,483 with a 20% down payment. Excluding taxes and insurance, the typical monthly mortgage payment is roughly **8.4% lower** than a year ago—an easing driven mainly by lower borrowing costs and slightly higher wages.
What changed over the past year
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Average mortgage rates fell from about 6.96% in January 2025 to near 6.1% last month, while household incomes in many places inched upward. Together those shifts translate into an extra roughly $30,300 in buying power for the median household compared with a year earlier, according to Zillow.
That improvement, Zillow’s senior economist Kara Ng says, is large enough to change choices for some buyers—turning deals that once felt out of reach into realistic options.
How this compares to recent extremes
The report notes purchasing power is now at its strongest level since March 2022, when mortgage rates were still under 5%. By contrast, the lowest point for affordability came in October 2023, when the median household could afford only about $272,224 as mortgage rates averaged 7.62%—the highest monthly average since 2000.
Where buyers gained the most
The impact has been uneven across the country. Coastal and high-cost metro areas saw the largest dollar increases in buying power, while several Sun Belt markets expanded the supply of homes that fall within reach of median earners.
| Metropolitan area | Increase in buying power (approx.) |
|---|---|
| San Jose, CA | $74,000 |
| San Francisco, CA | $56,115 |
| Washington, D.C. | $48,881 |
| San Diego, CA | $46,505 |
| Boston, MA | $46,390 |
Alongside larger buying power in expensive metros, the number of homes affordable to a median-income household rose by about **82,300** year-over-year. In January there were roughly **447,000** listings in that price band, representing about **40.3%** of all listings versus 34.8% a year earlier.
Markets where prices have softened contributed substantially to that growth in accessible inventory. Houston led with nearly 4,000 more homes within reach for the median buyer than a year ago, followed by Phoenix (+3,434), Dallas (+3,267), Miami (+2,981) and Atlanta (+2,279).
- Mortgage rates: A key driver of the shift — even small moves change monthly payments significantly.
- Local home values: Declines in some markets increase the pool of affordable listings for typical earners.
- Wage trends: Modest income gains compounded the effect of lower rates.
What this means for consumers: lenders and sellers may see renewed activity where affordability has improved, but the gains do not erase longer-term housing shortages or affordability gaps in many high-cost communities. Prospective buyers should still weigh local market conditions, down-payment needs and other ownership costs such as taxes and insurance before assuming broader affordability.
Zillow’s analysis offers a snapshot of how sensitive homebuying power remains to interest-rate swings and income trends—factors that will continue to shape demand and inventory as markets respond to monetary policy and local price movements.
