With the spring housing market just around the corner, homebuyers are getting more for their money as their mortgage payments are stretching further than they have in recent months, according to a new report from Zillow.
Last October, a $3,000 mortgage afforded a buyer a $560,000 home, down from an $865,000 home in January 2022. That double-digit jump in mortgage prices made a huge impact on what homes were actually within reach for buyers. Zillow found that today, a $3,000 mortgage payment buys you a home that’s 140 square feet smaller than one you could have purchased last year.
Now, as mortgage rates are falling from their 7% peak, buyers are finding they can get more home for their money. According to Zillow, “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.”
In January, a Seattle home with a median $3,000 monthly mortgage payment had a median square footage of 1,790, a 210 square-foot change year over year. Since October, with the change in mortgage rates, that square footage increased by 206.
“Mortgage rates have a huge impact on the types of homes buyers are able to afford,” said Anushna Prakash, economic data analyst at Zillow. “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. Buyers in more affordable hot markets are still getting solid bang for their buck, despite losing a lot of purchasing power.”
Zillow noted that the annual decline is more noticeable in some markets like Hartford which had the largest drop losing 1,200 square feet last year, while both Indianapolis and Cleveland lost more than 1,000 square feet. As expected, homes in less-expensive markets had more of a drop as higher costs had more buyers competing for those properties. However, Zillow also noted in the more expensive markets, a monthly $3,000 mortgage payment always bought you less space.