A recent dip in mortgage rates coupled with rising incomes has given the median-income U.S. household a significant boost in homebuying power, expanding their budget by more than $30,000 compared to a year ago, according to new research from Zillow.

This improvement in affordability means a median-income buyer can now comfortably afford a $331,483 home, provided they make a 20% downpayment. This marks the highest level of purchasing power since March 2022, according to the report.

The shift has unlocked roughly 82,300 additional affordable listings nationwide and is expected to fuel a more active spring home shopping season.  Anticipating this momentum, Zillow forecasts a 4% rise in existing home sales this year over 2025.

The primary driver behind this resurgence in buying power is the notable drop in borrowing costs. Mortgage rates fell from an average of 6.96% in January 2025 to 6.1% last month, according to Zillow’s data.

Combined with flattened home value growth and modest income growth, the typical mortgage payment, excluding taxes and insurance, is now 8.4% lower than it was a year ago.

At its recent low point in October 2023, when rates averaged 7.62%, a median-income household could only afford a $272,224 home, Zillow data shows. The report noted that this recovered $30,000 in buying power could mean the difference between buyers settling for a less-than-ideal property and choosing a home that fits their needs.

The impact of this financial relief varies significantly by region, with buyers in the nation’s most expensive markets seeing the largest dollar-value boosts to their budgets. For example, in the San Jose, Calif., metropolitan area, a median-income household has gained nearly $74,000 in buying power compared to January 2025, marking the largest increase among major metros analyzed by Zillow. San Francisco followed with a $56,115 boost, ahead of Washington, D.C. ($48,881), San Diego ($46,506) and Boston ($46,390).

Despite these positive trends, the housing market remains tight for many. Zillow notes that affordability is still strained, as a median-income household would spend 32.3% of their income on a typical mortgage payment under current conditions.

However, the overarching trajectory offers a distinct reprieve for sidelined buyers. With overall inventory showing a 6% year-over-year improvement in January, the nearly 447,000 homes a median-income household can afford today represents 40.3% of all active listings — up from 34.8% a year ago, per Zillow’s analysis.