June saw a 3.9% year-over-year increase in starter house sales, reaching their highest level in two years. This was a positive development in an otherwise weak housing market when sales of homes at all price points declined. This is in line with a recent report from Redfin, the Rocket-powered real estate agency. Home sales increased year over year in June for the tenth consecutive month, suggesting that first-time buyers are swarming the market.
Mid-priced homes (those in the 35th to 65th percentile of the market by sale price) saw a 0.9% year-over-year decline in July, while high-priced homes (those in the 65th to 95th percentile) saw a 3.6% decline.
In June, pending sales of starter homes increased 3.1% year-over-year, indicating that closed sales would probably continue to rise in the months ahead. In contrast, June saw a 0.7% and 2.7% year-over-year decline in pending sales of mid- and high-priced properties, respectively.
“In a market where it’s difficult for most Americans to afford a dream home, many are turning toward starter homes,” said Redfin Senior Economist Sheharyar Bokhari. “They’re typically smaller and more modest, but starter homes remain within reach for some buyers who have been priced out of higher tiers. First-time buyers are especially apt to go for starter homes, as they don’t have equity from a previous home sale to help with their payments.”
Many Americans are forced to rent or live with family since even beginning homes are too costly, particularly in major cities like San Francisco where the median cost of a starter home is close to $1 million. While the average American household makes an estimated $86,258 annually, homebuyers in the United States must earn $112,131 in order to afford the median cost property for sale.
“With prices rising and mortgage rates elevated, some first-time buyers may be pushed out of the market by move-up buyers who aren’t able to afford the next tier themselves,” Bokhari said.
Starter Homes Offer Opportunities for Buyers
In June, the average starter home in the United States sold for a record $260,000, a 3.1% increase from the previous year.
High-priced homes increased 2.7% to $577,177, while mid-priced homes increased 2.1% to $370,784 over the previous year. Both fell barely short of previous months’ price records. Even while starter home prices are still at an all-time high, price growth has slowed for six months in a row. The slowest pace in a year was 3.1% in June.
growing inventory, with the number of active listings increasing 19% year-over-year to the highest level for June since 2017, is a major factor contributing to the starter-home segment’s slower price increase and growing sales. Out of all the price brackets, that one grew the fastest.
While upper-priced properties increased 13.2% year-over-year, middle-priced listings increased 15.1%. Redfin experts say the increased number of starter houses for sale is good news for first-time homeowners.
“First-time buyers definitely have more opportunities now. Not only are there more lower-priced homes available, but there’s less demand. The buyers who are out there are no longer in competition with 10 other offers, or all-cash buyers,” said Kathy Scott, a Redfin Premier agent in Phoenix, where active listings of starter homes are up more than 40% from a year ago. “With so many starter homes on the market, buyers have an opportunity to take their time looking for houses that fit their needs. Some are waiting for prices to go down—and they might—but if your plan is to stay in the home for five to 10 years, you will build equity in your home.”
To read more, click here.
