Join today and have your say! It’s FREE!

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.
Please Try Again
{{ error }}
By providing my email, I consent to receiving investment related electronic messages from Stockhouse.

or

Sign In

Please Try Again
{{ error }}
Password Hint : {{passwordHint}}
Forgot Password?

or

Please Try Again {{ error }}

Send my password

SUCCESS
An email was sent with password retrieval instructions. Please go to the link in the email message to retrieve your password.

Become a member today, It's free!

We will not release or resell your information to third parties without your permission.

Buyers are getting more for their money as home shopping season approaches

Z

Home size per dollar still largest in Memphis and the Midwest, despite declines driven by mortgage rates

  • Rising mortgage rates last year cut $305,000 off what a buyer could afford with a $3,000 payment, but that trend has started to reverse.
  • Affordable active markets in the Midwest and Great Lakes regions saw the largest declines in purchasing power in 2022, but still offer some of the biggest houses for the money.
  • Mortgage costs nearly doubled since 2019, but have eased slightly in recent months.

SEATTLE, Feb. 9, 2023 /PRNewswire/ -- Home buyers' mortgage payments have started stretching a bit further in recent months, a new Zillow® analysis shows.

As mortgage rates doubled last year, the home price afforded by a $3,000 payment1 plummeted from $865,000 in January to a low of $560,000 in October. That significantly changed the size and price of homes within a buyer's reach. On average, a $3,000 monthly mortgage payment today buys a home 140 square feet smaller than a home purchased a year ago.

But as rates have dropped from a peak just above 7%, buyers are getting larger homes, with higher price tags, at a fixed monthly cost. The typical home value associated with a $3,000 mortgage payment is up about $60,000 since October and home size has recovered by 84 square feet.

"Mortgage rates have a huge impact on the types of homes buyers are able to afford. Rates that doubled over the past year carved an extra bedroom or office space off of homes at the national level, though the sting has lessened in recent weeks," said Anushna Prakash, economic data analyst at Zillow. "Buyers in more affordable hot markets are still getting solid bang for their buck, despite losing a lot of purchasing power."

Typical home value at a standing $3,000 monthly mortgage payment, based on weekly mortgage rates for a 30-year fixed-rate loan and using a 20% down payment

The annual decline is more pronounced in some markets. Hartford saw the largest drop in what $3,000 per month can buy in 2022, losing 1,200 square feet. Buyers in Indianapolis and Cleveland both lost out on more than 1,000 square feet in the last year. Cleveland and Kansas City are among the top 10 metros for home size at this price point and are among Zillow's 10 hottest markets for 2023.

Homes in less expensive markets have a larger footprint to begin with, and therefore had farther to fall as climbing mortgage rates applied pressure to buyers' wallets. As costs rose in 2022, there were more buyers competing in those markets than in their more expensive counterparts.

On the other hand, $3,000 per month has always gotten a buyer less space in pricey markets, but their floor plans are shrinking all the same. In San Jose it will buy a 1,052-square-foot home, down from 1,268 square feet last year. Los Angeles, San Diego and San Francisco are close behind, with square footage for each below 1,400 square feet.

Although affordability is still a major challenge, buying power for home shoppers has rebounded in recent months. Since bottoming out in October, home size for a $3,000 payment has increased the most in Salt Lake City (365 square feet), Minneapolis (357), Memphis (346) and Denver (340).

Heading into the home shopping season, shoppers should prepare by improving their credit as much as possible in order to score the best mortgage rate. Even a small rate drop can save tens of thousands of dollars over the life of a loan. A borrower with an "excellent" credit score — between 760 and 850 — can qualify for a 30-year fixed-rate mortgage with a 6.0% interest rate2. For the same loan, a similar borrower with a "fair" credit score — between 620 and 639 — qualifies for a 7.58% rate. This equates to a $348 difference in monthly mortgage payments and nearly $125,431 in interest over the life of a 30-year fixed loan, based on the current price of a typical U.S. home ($329,542)3.

The spring sales season is kicking off, and Zillow tools and tech are here to help. More than 1 million shoppers have used the down payment assistance resource built into Zillow's home detail pages, and Zillow's affordability calculator can help determine what kind of home will fit individuals' budgets.

Change in median square footage of single-family and condo homes that can be bought with a $3,000 mortgage payment, using a 30-year fixed-rate loan and a 20% down payment.

Metropolitan Area*

Median Square Footage at
$3,000 Payment (Jan. 1,
2023)

Year Over Year
Change in Square
Feet

Square Footage
Increase Since
October

Memphis, TN

3,900

-853

346

Indianapolis, IN

3,732

-1,092

298

Cleveland, OH

3,512

-1,004

265

Oklahoma City, OK

3,406

-802

206

Houston, TX

3,395

-412

213

Birmingham, AL

3,312

-686

198

Richmond, VA

3,283

-538

223

Cincinnati, OH

3,258

-554

218

Kansas City, MO

3,125

-707

171

Atlanta, GA

3,122

-735

259

Charlotte, NC

3,084

-643

284

Detroit, MI

3,081

-595

248

Dallas–Fort Worth, TX

3,068

-707

331

Louisville–Jefferson County, KY

3,063

-769

237

Virginia Beach, VA

3,037

-477

212

St. Louis, MO

3,036

-651

216

Pittsburgh, PA

3,010

-783

207

Minneapolis–St. Paul, MN

3,003

-501

357

Hartford, CT

3,003

-1,202

264

Milwaukee, WI

3,000

-900

300

Buffalo, NY

2,972

-888

242

Columbus, OH

2,912

-626

266

San Antonio, TX

2,871

-534

151

Raleigh, NC

2,866

-779

306

New Orleans, LA

2,847

-314

112

Chicago, IL

2,800

-372

206

Las Vegas, NV

2,741

-527

322

Orlando, FL

2,730

-724

242

Philadelphia, PA

2,680

-860

220

Nashville, TN

2,641

-370

194

Baltimore, MD

2,522

-840

242

Jacksonville, FL

2,494

-409

144

Phoenix, AZ

2,413

-471

287

Tampa, FL

2,402

-342

162

Austin, TX

2,387

-321

223

Salt Lake City, UT

2,285

-727

365

Providence, RI

2,192

-592

200

United States

2,172

-140

84

Washington, DC

2,160

-436

192

Denver, CO

2,140

-698

340

Portland, OR

2,111

-604

293

Sacramento, CA

2,076

-460

338

Miami–Fort Lauderdale, FL

1,977

-459

176

Riverside, CA

1,920

-811

220

Seattle, WA

1,790

-210

206

Boston, MA

1,754

-486

163

New York, NY

1,744

-437

99

San Francisco, CA

1,314

-166

114

San Diego, CA

1,268

-482

226

Los Angeles–Long Beach–Anaheim, CA

1,198

-366

111

San Jose, CA

1,052

-176

149

*Table ordered by median square feet as of Jan. 1, 2023

1 Mortgage payment assumes the weekly average 30-year fixed mortgage rate from the Freddie Mac Primary Mortgage Market Survey® and a 20% down payment.
2 Based on the FICO® Loan Savings Calculator on myfico.com. Rates as of Feb. 7, 2023.
3 According to the Zillow Home Value Index (ZHVI) national raw figure for January 2023.

About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting, or financing with transparency and ease.

Zillow Group's affiliates and subsidiaries include Zillow®; Zillow Premier Agent®; Zillow Home Loans™; Zillow Closing Services™; Trulia®; Out East®; StreetEasy®; HotPads®; and ShowingTime+℠ , which houses ShowingTime®, Bridge Interactive®, and dotloop® and interactive floor plans. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

Zillow logo (PRNewsfoto/Zillow Group)

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/buyers-are-getting-more-for-their-money-as-home-shopping-season-approaches-301742851.html

SOURCE Zillow



Get the latest news and updates from Stockhouse on social media

Follow STOCKHOUSE Today