Rising mortgage rates have outpaced income growth, reducing buying power for many Americans and lowering the maximum affordable home price for a median-income household by nearly $30,000 since 2019. Wages have increased about 15.7%, but that gain has not fully offset higher borrowing costs. Mortgage rates around 6.5%–7% have materially increased monthly payments; at a 6.75% rate, a $400,000 loan can cost roughly $600 more per month than at a 4% rate. Several metros—Cleveland, Phoenix, Richmond, Indianapolis, Tampa, and Austin—have seen improved affordability driven by robust local wage growth.
In a challenging housing market where rising mortgage rates have outpaced income growth, Americans are facing reduced buying power, a new report from Realtor.com shows. However, some cities have seen an improvement in affordability due to robust wage growth. While the national trend shows a decrease in affordable home prices compared to 2019, certain metros like Cleveland, Phoenix, Richmond, Indianapolis, Tampa, and Austin have witnessed an increase in buying power.
Affordability Challenge: Nationally, the maximum affordable home price for a median-income household has dropped by nearly $30,000 compared to 2019, despite a 15.7% increase in wages. Impact of Interest Rates: Mortgage rates have risen to 6.5% to 7%, significantly affecting buying power. For instance, at a 6.75% rate, a $400,000 home loan could cost $600 more per month compared to a 4% rate.
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