--- title: Homebuyers Have Lost $60,000 in Purchasing Power in a Year description: The real estate market is hurting thanks to high mortgage rates. In just one year, homebuyers have lost $60,000 in purchasing power. authors: - name: Brenden Rearick role: Reporter url: https://money.com/author/brenden-rearick/ bio: Brenden Rearick is a former news reporter at Money who specialized in mortgages, real estate, and personal finance topics. education: University of Pittsburgh, BA at_money_since: 2023 articles: 133 covers: - Housing - Banking - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes - Technology former_staff: true editors: - name: Brad Tuttle role: Senior Editor url: https://money.com/author/brad-tuttle/ bio: Brad Tuttle is a former senior editor at Money with over 10 years’ experience covering a vast number of personal finance topics, including careers, cars, travel, budgeting, investing, insurance, credit cards, consumer psychology, real estate, banking, and shopping and deals. education: Columbia University School of Journalism, MS at_money_since: 2014 articles: 366 covers: - Housing - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology social: - https://twitter.com/bradrtuttle - https://linkedin.com/in/brad-tuttle-834b225 former_staff: true published: '2023-07-14T16:09:29.000Z' modified: '2024-02-18T13:11:01.000Z' section: Housing tags: - News word_count: 603 canonical: https://money.com/homebuyer-purchasing-power-down-mortgage-rates/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We may earn a fee if you click on the links below. Compensation does not determine ranking. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Photo Illustration of a couple looking at a beautiful house with a for sale sign](https://img.money.com/2023/07/News-Homebuyers-Purchasing-Power.jpg) Homebuyers today are getting a lot less for their money: Someone with a $3,000 monthly budget now can afford to purchase a $450,000 home — versus a $510,000 property on the same budget a year ago. The reason for the difference boils down to [mortgage rates](https://money.com/current-mortgage-rates/), which have a stranglehold on the real estate market right now. As long as they stay elevated, there's reason to believe that the [housing inventory](https://money.com/why-are-there-no-houses-for-sale/) will stay depressed. High rates have cost would-be homebuyers dearly. New [data](https://www.redfin.com/news/housing-market-update-home-prices-rise-first-time-five-months/) from real estate brokerage Redfin shows how high mortgage rates have been steadily robbing buyers of purchasing power while also trapping sellers in their current mortgages, leading to a dilemma in which sellers are loath to list and buyers are able to afford less. ## Shopping for a new home? Find out how much you can afford today. ### Mortgage Experts at Rocket Mortgage (NMLS #3030) are available to get you started on your home-buying journey with solid advice and priceless information. To find out more, click on your state today. [View Rates](https://money.com/pr/u1bd42af4e5f?ap_referrer=%2Fhomebuyer-purchasing-power-down-mortgage-rates%2F) ## Mortgage rates, purchasing power and home supply Redfin's new report chronicles the decline of purchasing power for U.S. homebuyers since July of last year. At that time, when mortgage rates averaged at about 5.3%, a homebuyer on a $3,000 monthly budget could have afforded a house priced at $510,000. At the [current average mortgage rate](https://money.com/current-mortgage-rates/) of almost 7%, however, that same budget can only afford a $450,000 house. This comes out to a $60,000 decline in purchasing power for homebuyers in just the last 12 months. This drop in [how much house a buyer can afford](https://money.com/how-much-house-can-i-afford/) only becomes more severe when you compare the current situation to early in the pandemic, when mortgage rates were under 3%. Potential sellers, too, are downtrodden by the high rates today, since many purchased their homes years ago and are paying mortgages in the range of 2.5% to 3% Putting one's house on the market now would mean giving this favorable rate up for one that's twice or even three times as high, making many would-be [home sellers feel trapped](https://money.com/low-mortgage-rates-trap-home-sellers/). This mortgage trap is one reason for the beleaguered housing inventory. Redfin uses "months of supply" as the metric to measure housing inventory — it's the amount of time it would take at the current sales pace to sell all available listed houses. The company says that during the four weeks ending July 9, there was only a 2.8-month supply of homes for sale, whereas it's between four and five months normally. Meanwhile, new listings are down 27% from July of 2022. ## Home prices and home values keep rising High mortgage rates continue to hurt the real estate market on all sides. Would-be sellers are reluctant to list their homes, while buyers are getting less for their money, with less of a selection to boot. The fact that homes are only becoming more expensive makes for a bleaker picture. The [value of the average American home](https://money.com/average-home-worth-all-time-high/) is at an all-time high of $350,213. Unsurprisingly, the [*price* of an average American home](https://money.com/home-prices-peak-most-big-cities/) is at an all-time high as well. Data supplied to Money by real estate company Black Knight's [Home Price Index](https://www.blackknightinc.com/data-reports/black-knights-may-2023-mortgage-monitor/) shows that the average home is priced at $437,326 — barely within the $3,000 per month budget used by Redfin to gauge the loss in purchasing power. In nearly half of the country's 50 largest real estate markets, homes are both valued and priced lower than they were in July of 2022. But, given that much of the country is generally trending up, those markets could very well reach new heights, too. All said, it's reasonable to expect these averages to rise even more before they fall. ## Getting pre-approved for a mortgage helps you get closer to your dream home ### Find out how much house you can borrow before you start looking. Click below to get started with Rocket Mortgage (NMLS: #3030) today. [View Rates](https://money.com/pr/eb8791c7bc79?ap_referrer=%2Fhomebuyer-purchasing-power-down-mortgage-rates%2F) ![](https://s3.consumersadvocate.org/prd/image/image/26681/medium_57f09f10-efb8-487d-a73e-5f7d605144eb.png) Imagine finally owning your dream home — Rocket Mortgage (NMLS #3030) can help! 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