After years of high mortgage rates, the Federal Reserve finally cut rates on Wednesday at its policy meeting.
The Fed doesn’t set mortgage rates, but the two numbers often move in the same direction — and this long-awaited rate cut should give the sluggish real estate market a much-needed jumpstart.
Just 11 months ago – in October 2023 – mortgage rates hit a peak of 7.79% for a 30-year fixed loan, which paralyzed both homebuyers and sellers and severely limited what buyers could afford.
But last week, rates fell to 6.2%, the lowest they’ve been since February 2023.
Mortgage rates are expected to continue to ease through the rest of this year and into next year, according to Hannah Jones, senior economic research analyst at Realtor.com®, in her latest report.
If this happens, home buyers will see a huge increase in purchasing power.
If mortgage rates fell to 6%, the typical American buyer would see an additional $9,000 improvement in purchasing power, on average.
If rates fall to 5.5%, the typical buyer would see a $34,000 increase in purchasing power.
Where home buyers will see the biggest increase in their purchasing power
“The top 10 metros that could see the biggest dollar increase in purchasing power are the highest-priced areas of the country,” says Jones.
How much more would buyers in those expensive areas be able to spend on a home if rates fell to 6% or 5.5%?
We reverse the numbers below.
San Jose, CA
August median list price: $1,399,000
Increase in purchasing power if rates fall to 6%: $30,100
Increase in purchasing power if rates fall to 5.5%: $110,100
Los Angeles, CA
August median list price: $1,190,000
Increase in purchasing power if rates fall to 6%: $25,600
Increase in purchasing power if rates fall to 5.5%: $93,600
Oxnard, CA
August median list price: $1,050,000
Increase in purchasing power if rates fall to 6%: $22,600
Increase in purchasing power if rates fall to 5.5%: $82,600
San Diego, CA
August median list price: $999,000
Increase in purchasing power if rates fall to 6%: $21,500
Increase in purchasing power if rates fall to 5.5%: $78,600
San Francisco, CA
August median list price: $969,000
Increase in purchasing power if rates fall to 6%: $20,900
Increase in purchasing power if rates fall to 5.5%: $76,300
Boston, MA
August median list price: $834,500
Increase in purchasing power if rates fall to 6%: $18,000
Increase in purchasing power if rates fall to 5.5%: $65,700
Bridgeport, CT
August median list price: $800,000
Increase in purchasing power if rates fall to 6%: $17,200
Increase in purchasing power if rates fall to 5.5%: $63,000
Seattle, WA
August median list price: $775,000
Increase in purchasing power if rates fall to 6%: $16,700
Increase in purchasing power if rates fall to 5.5%: $61,000
New York, NY
August median list price: $750,000
Increase in purchasing power if rates fall to 6%: $16,200
Increase in purchasing power if rates fall to 5.5%: $59,000
Honolulu, HI
August median list price: $725,000
Increase in purchasing power if rates fall to 6%: $15,600
Increase in purchasing power if rates fall to 5.5%: $57,100
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