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Despite higher mortgage rates and rising home prices, a new analysis identifies six major U.S. metropolitan areas where the typical household's buying power has actually improved since 2019. Driven by robust wage growth, cities like Cleveland, Phoenix, and Tampa offer a relative bright spot for buyers, though a severe shortage of affordable listings remains a significant challenge nationwide. This article breaks down the data and explores what this means for your home purchase.
Buying power is the maximum home price a buyer can afford based on their income and prevailing mortgage interest rates. It is a crucial metric for understanding housing affordability. According to the widely followed 30% rule of thumb, a household should not spend more than 30% of its gross monthly income on housing costs.
Nationally, buying power has eroded significantly. Even though the median household income has increased by 15.7% since 2019, the maximum affordable home price for that same household has dropped by nearly $30,000 due to much higher interest rates. While a median-income household could afford a $325,000 home six years ago, that budget has shrunk to approximately $298,000 today. Compounding the problem, the national median list price has surged 38% over the same period, reaching $439,450 as of mid-2025.
A recent analysis of the 50 largest U.S. metros reveals that buying power has improved since 2019 in only six cities:
The common factor driving this improvement is stronger-than-average wage growth, which has helped offset the impact of higher mortgage rates. For example, in Cleveland, a typical household's buying power increased by 4.4%, allowing them to afford a $260,000 home today compared to $249,000 in 2019.
Not necessarily. This is the critical dilemma for modern buyers. Even in these six metros, the share of homes for sale that are considered affordable to median-income earners has fallen sharply since 2019. This is because home price appreciation has far outpaced gains in buying power.
| Metro Area | Affordable Listings (2019) | Affordable Listings (2025) |
|---|---|---|
| Phoenix | 50% | Under 14% |
| Tampa | 54% | Roughly 22% |
| Cleveland | 65% | 50% |
As the data shows, while a household in Tampa can technically afford a slightly more expensive home than in 2019, the pool of available homes within that budget has shrunk by more than half. "Lack of affordable inventory and worsening affordability conditions discourage buyers from getting into the market," says Hannah Jones, a senior economic research analyst.
The primary driver of the decline in buying power is the dramatic rise in mortgage rates. Before the pandemic, rates were in the 3.5% to 4.5% range, reaching historic lows during 2020-2021. By 2025, rates had climbed into the high 6% to 7% range.
To illustrate the impact, consider a $400,000 home with a 20% down payment:
This $600 monthly difference amounts to $7,200 per year, significantly straining household budgets. While incomes have grown, the $11,000 increase in the typical household income since 2019 only adds about $300 to the recommended monthly housing budget under the 30% rule—far short of compensating for the rate increase.
The key to improving affordability lies in two areas: mortgage rates and housing supply. A modest decrease in interest rates, which some analysts anticipate following potential Federal Reserve action, could provide immediate relief by boosting buying power. However, a more permanent solution requires an increase in the supply of homes for sale, particularly in more affordable price segments.
For buyers in 2025, the reality is a more modest budget due to elevated rates. Focusing on metros with strong job markets and looking in suburban areas can reveal opportunities. As one Phoenix real estate agent notes, sellers are currently more willing to negotiate on price and concessions, presenting a window of opportunity before potential rate cuts intensify competition.
The bottom line for buyers: Your buying power is heavily influenced by interest rates, not just your income. While a few markets show improvement, be prepared for a competitive search for affordable homes and consider consulting a local agent to understand hyper-local opportunities.
