Entry-level home shoppers are dealing with faster-rising prices and more competition than those after more-expensive homes, a new Zillow analysis finds.
“Buyers shopping for the least-expensive homes this spring aren’t noticing much difference from the pandemic-era market heat,” said Skylar Olsen, Zillow’s chief economist. “Competition is fierce, but there aren’t many homes for sale, so buyers should be patient but prepared to move quickly and anticipate a bidding war once they find a home they love.”
Typical Home Values
Typical home values for the least-expensive one-third of houses rose 8% – nearly $13,000 – over the past year. Mid-level homes appreciated by 3% and the most-expensive houses depreciated by 1%, the first loss of value for the top tier since 2012.
Entry-level homes have exploded in value throughout the pandemic across the U.S., gaining at least 60% more value since February 2020 in seven of the 50 largest markets, with Tampa, Richmond, and Charlotte leading the charge.
Mortgage-interest rate hikes do more damage to monthly payments as home prices rise. This helps explain why top-tier home values are falling fastest annually in some of the most expensive markets: San Francisco (-14%), San Jose (-11%), and Seattle (-11%).
Slight Recovery
A slight annual recovery in inventory has left out entry-level shoppers. There are just 1% more homes available for sale in the bottom price tier compared to 8% and 13% more in the slower-moving middle and top tiers, respectively.
A rate lock — the effect of relatively high mortgage rates dissuading current homeowners from selling — contributes to a lower flow of new listings across price tiers. March saw record-low new listings for this time of year, down 22% from last year. But rate lock has the biggest impact on entry-level buyers in expensive West Coast markets. San Jose, San Francisco, Sacramento, Portland, and Seattle all have fewer than half as many new bottom-tier listings in March compared to last year.
In the recent past, entry-level shoppers had an easier time finding discounts than their well-heeled colleagues, but that comparative benefit is also gone. The share of mid- and top-tier homes that sold above the list price rose far above the bottom-tier share through most of the pandemic. Super-low rates had cranked up demand for more-expensive houses. But after mortgage rates peaked at 7% last fall, the share selling above list price for all three tiers converged; now they’re tracking together.
|
Metropolitan |
Bottom Tier |
Top Tier |
Bottom Tier |
Top Tier |
Bottom Tier |
Top Tier |
|
United States |
8 % |
-1 % |
48 % |
33 % |
1 % |
13 % |
|
New York, NY |
5 % |
0 % |
34 % |
19 % |
-24 % |
-9 % |
|
Los Angeles, CA |
0 % |
-6 % |
35 % |
28 % |
-18 % |
2 % |
|
Chicago, IL |
6 % |
0 % |
40 % |
19 % |
-19 % |
-13 % |
|
Dallas, TX |
2 % |
-1 % |
44 % |
40 % |
3 % |
15 % |
|
Houston, TX |
4 % |
2 % |
41 % |
33 % |
12 % |
28 % |
|
Washington, DC |
3 % |
-2 % |
26 % |
22 % |
-32 % |
-3 % |
|
Philadelphia, PA |
8 % |
4 % |
43 % |
31 % |
-7 % |
-12 % |
|
Miami, FL |
16 % |
6 % |
64 % |
54 % |
18 % |
48 % |
|
Atlanta, GA |
6 % |
1 % |
64 % |
39 % |
-1 % |
9 % |
|
Boston, MA |
4 % |
-1 % |
34 % |
24 % |
-32 % |
4 % |
|
Phoenix, AZ |
-2 % |
-3 % |
46 % |
40 % |
1 % |
55 % |
|
San Francisco, CA |
-5 % |
-14 % |
26 % |
16 % |
-37 % |
2 % |
|
Riverside, CA |
1 % |
-4 % |
48 % |
34 % |
0 % |
15 % |
|
Detroit, MI |
5 % |
1 % |
54 % |
27 % |
9 % |
-2 % |
|
Seattle, WA |
-3 % |
-11 % |
35 % |
32 % |
-32 % |
6 % |
|
Minneapolis, MN |
1 % |
-1 % |
26 % |
23 % |
-22 % |
8 % |
|
San Diego, CA |
1 % |
-6 % |
41 % |
43 % |
-38 % |
-1 % |
|
Tampa, FL |
8 % |
2 % |
69 % |
51 % |
26 % |
59 % |
|
Denver, CO |
-1 % |
-5 % |
29 % |
25 % |
-4 % |
47 % |
|
Baltimore, MD |
8 % |
2 % |
35 % |
25 % |
-7 % |
-12 % |
|
St. Louis, MO |
8 % |
2 % |
45 % |
27 % |
2 % |
-1 % |
|
Orlando, FL |
8 % |
3 % |
53 % |
43 % |
12 % |
41 % |
|
Charlotte, NC |
7 % |
1 % |
65 % |
45 % |
30 % |
29 % |
|
San Antonio, TX |
5 % |
1 % |
43 % |
37 % |
42 % |
63 % |
|
Portland, OR |
-1 % |
-4 % |
30 % |
25 % |
-32 % |
11 % |
|
Sacramento, CA |
-3 % |
-7 % |
32 % |
24 % |
-36 % |
2 % |
|
Pittsburgh, PA |
0 % |
0 % |
45 % |
21 % |
-6 % |
9 % |
|
Cincinnati, OH |
9 % |
3 % |
52 % |
32 % |
-17 % |
3 % |
|
Austin, TX |
-6 % |
-8 % |
48 % |
45 % |
30 % |
95 % |
|
Las Vegas, NV |
0 % |
-5 % |
34 % |
27 % |
9 % |
38 % |
|
Kansas City, MO |
7 % |
2 % |
51 % |
31 % |
5 % |
12 % |
|
Columbus, OH |
8 % |
3 % |
54 % |
33 % |
-10 % |
16 % |
|
Indianapolis, IN |
6 % |
1 % |
57 % |
37 % |
8 % |
32 % |
|
Cleveland, OH |
6 % |
4 % |
47 % |
30 % |
-1 % |
2 % |
|
San Jose, CA |
-1 % |
-11 % |
31 % |
24 % |
-54 % |
16 % |
|
Nashville, TN |
6 % |
-1 % |
55 % |
48 % |
25 % |
67 % |
|
Virginia Beach, VA |
8 % |
3 % |
40 % |
29 % |
-16 % |
-9 % |
|
Providence, RI |
6 % |
2 % |
42 % |
35 % |
-34 % |
-13 % |
|
Jacksonville, FL |
7 % |
2 % |
61 % |
51 % |
49 % |
63 % |
|
Milwaukee, WI |
8 % |
3 % |
39 % |
21 % |
-32 % |
-21 % |
|
Oklahoma City, OK |
10 % |
4 % |
56 % |
31 % |
-9 % |
77 % |
|
Raleigh, NC |
4 % |
0 % |
54 % |
43 % |
2 % |
66 % |
|
Memphis, TN |
8 % |
2 % |
62 % |
35 % |
7 % |
36 % |
|
Richmond, VA |
21 % |
-3 % |
67 % |
21 % |
-12 % |
-8 % |
|
Louisville, KY |
10 % |
2 % |
47 % |
27 % |
-6 % |
2 % |
|
New Orleans, LA |
11 % |
-1 % |
34 % |
17 % |
49 % |
48 % |
|
Salt Lake City, UT |
-2 % |
-5 % |
43 % |
36 % |
6 % |
66 % |
|
Hartford, CT |
9 % |
5 % |
43 % |
31 % |
-32 % |
-9 % |
|
Buffalo, NY |
4 % |
2 % |
41 % |
28 % |
-1 % |
-2 % |
|
*Table ordered by market size |
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Source: Zillow
