The 6 cities where homebuyers have more power in

Higher mortgage rates and climbing asking prices have eroded Americans’ buying power in most large cities over the last few years, but a handful of metros continue to stand out for offering homes that families can actually afford.   

Buying power refers to the amount of money a homebuyer can spend on the purchase of a home with mortgage funds, which are based on the buyer’s income and current interest rates. 

This summer, homebuyers have been forced to contend with rates that have risen faster than wages since the pre-pandemic era, arriving at the high 6% range, says Realtor.com® senior economic research analyst Hannah Jones.

Meanwhile, home prices have continued to surge, while housing inventory has shrunk compared with 2019, leaving budget buyers with fewer affordable choices, according to the latest buying power report from Realtor.com.

For a home to be considered “affordable,” buyers are generally advised to follow the “30% rule of thumb,” which says that a household should spend no more than 30% of its monthly income on housing costs.

Nationally, the maximum affordable home price for a median-income household has plunged by nearly $30,000 compared with 2019, even as wages have climbed 15.7%. Put simply, six years ago, a median-income household could afford a $325,000 property. Today, that same household could only manage a $298,000 home even while earning more money.

To make matters worse, the median list price has surged nearly 38% since 2019, reaching $439,450 as of July, up 0.5% year over year, according to the latest monthly housing market trends report.

“Buyers face a conundrum,” says Jones. “Their purchasing power has dropped at the same time that homes have gotten more expensive.”

Metros where buying power has ticked up

However, there are a few bright spots.

Among the 50 largest U.S. metros, buying power has improved since 2019 in six cities: Cleveland; Phoenix; Richmond, VA; Indianapolis; Tampa, FL, and Austin, TX.

Though spread across the map, these metros share one key factor helping homebuyers there stretch their dollars further: robust wage growth.

Six years ago, the typical household in Cleveland could comfortably purchase a $249,000 home. Fast forward to July 2025, the same household could afford a $260,000 price tag, representing a 4.4% increase in buying power. 

In more good news for Clevelanders, half of the city’s for-sale homes last month were within reach for median-earning households.

The pandemic-era boomtowns of Phoenix, Tampa, and Austin also saw buying power tick up thanks to growing wages, with increases ranging from a mere 0.3% for Austin to a solid 2.5% for Phoenix—the second highest among the top metros.

For instance, in Phoenix, a typical family in July could afford a $332,000 property—about $8,000 higher than in 2019.

Gordon Hageman, a real estate agent with Arizona 1 Real Estate, says that since the pandemic, home prices in Phoenix have skyrocketed, but the market has now stabilized.

“Compared to metros like Los Angeles or Austin, Phoenix still offers buyers more value—especially if they’re realistic with expectations,” Hageman tells Realtor.com.

Phoenix suburbs such as Queen Creek, San Tan Valley, Buckeye, and Goodyear continue to provide affordable options, with builders and sellers offering strong incentives.

According to Hageman, most buyers these days are focused on monthly payments. When rates climb closer to 7%, activity slows, but in the 6% range demand picks up again.

“Right now is actually a strong time to buy, with sellers more willing to negotiate repairs, credits, and price adjustments—opportunities that may shrink once rates come down and competition picks up,” he adds.

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Meanwhile, in Tampa, a median-earning household could buy a home for just $1,000 more than in 2019.

But buying power is not the only factor to consider. Despite improvements in that department, surging home prices mean that few listings are available at an “affordable” price point in these metros.

“Even in these six markets where buying power has improved, none of them see a higher share of homes for sale that are affordable to median earners compared to 2019,” points out Jones.

Phoenix saw its share of affordable homes shrink drastically from 50% to under 14%, while Tampa’s budget-friendly inventory dropped from 54% to roughly 22% in six years. 

Hageman predicts that central Phoenix will likely become less affordable in the near future, but buyers willing to look beyond the city center “will continue to find affordable housing,” he says.

Even in Cleveland, the supply of cost-effective listings edged down from 65% to 50%.

“Lack of affordable inventory and worsening affordability conditions discourage buyers from getting into the market, and push their goals of buying a home further down the line,” says Jones.

Interest rates vs. wage growth

A year before COVID turned the world upside down, mortgage rates hovered in the 3.5% to 4.5% range. At the height of the pandemic, the rates reached historic lows, but by 2025 had climbed to 6.5% to 7%, pricing many would-be buyers out of the market.

To see how that affects buying power, consider a $400,000 home. At a 4% rate, the monthly principal and interest payment (with a 20% down payment) amounts to about $1,500. But at a 6.75% rate, that same home loan jumps to $2,100—a difference of $600 per month, or $7,200 per year.

Over the last six years, the typical household income has grown from $68,000 to $79,000, but Jones notes that the $11,000 difference only boosts a homebuyer’s recommended housing budget—following the “30% rule”— by roughly $300.

“It helps, but not enough,” says the economist.

The bottom line is that buyers in 2025 have significantly more modest homebuying budgets because of elevated interest rates, even if their incomes are higher. On top of that, surging prices have depleted affordable inventory.

What could boost buying power?

According to Jones, even a marginal decrease in mortgage interest rates could help boost buying power. The average rate on 30-year fixed home loans was 6.58% for the week ending Aug. 14, having fallen to a 10-month low.

The Federal Reserve is widely expected to cut its key rate by a quarter-point at its next policymaking meeting in September, a move that could bring buyers some relief.

Stronger income growth could also improve housing affordability, but its impact is slower because wages tend to rise more gradually than interest rates can fall.

“That’s why focusing on easing rates and increasing housing supply may be the fastest way to expand buying power and give buyers more options within their budget,” concludes Jones.