Along with more purchasing power, house hunters have negotiating power as sellers greatly outnumber buyers.
The daily average mortgage rate dropped to 5.99% on February 23, the lowest level since September 2022, except for a few hours on January 9 when rates fell to the same level.
A buyer on a $3,000 monthly budget can afford a $479,750 home with today’s mortgage rate. Compare that to the $471,750 home they could have bought at the start of this year when rates were hovering around 6.2%, or the $446,000 home they could have bought a year ago with a 6.9% rate. That means a buyer on that budget has gained $8,000 in purchasing power since the beginning of 2026, and $33,750 over the last year.
To look at affordability another way, the monthly mortgage payment on the median-priced U.S. home, which costs $423,000, is $2,790. Two months ago, when rates were at 6.2%, the monthly payment would have been $2,834; a year ago, the payment would have been $2,992 with a 6.9% rate.
This is the latest piece of good news for house hunters this month. Among the others:
- Homebuyers must earn $111,000 to afford the typical U.S. home, higher than the median household income but down 4% from last year, according to a separate Redfin report. On a local level, affordability is improving in 37 of the 50 most populous metros.
- There are a near-record 600,000 more home sellers than buyers in the housing market, giving buyers negotiating power. In many parts of the country, buyers are successfully negotiating prices down and getting concessions from sellers.
- Home-price growth is losing steam; prices are up just 1%, compared to 4% growth a year ago.
Declining mortgage rates can be good news for sellers, too, because they pique the interest of buyers. They can also add inventory to the market, motivating locked-in homeowners to list their houses.
Mortgage rates are coming down because U.S. Treasury yields are falling as investors park their money in bond markets amid tariff uncertainty and AI jitters.
