After two years of fierce jockeying for a low supply of middle- and high-priced homes during the pandemic, competition is now the strongest for a tightening supply of lower-priced homes, according to a new Zillow analysis.
Throughout the majority of the pandemic, the inventory deficit decreased the most for homes in the top two price tiers, a trend that has now reversed. At the end of July, inventory in the most expensive third of the housing market was up 11% month-over-month, 19.3% higher than a year earlier, while inventory in the middle third was up 12.7% month-over-month and 17.3% annually. But, inventory in the lowest-priced third only grew by 11.2% month-over-month and 10.4% year-over-year.
Total sales for lower-priced homes eclipsed sales for high-priced homes at the end of 2021, closing a gap between the two price points. Meanwhile, price cuts are now most common for homes in the top two price tiers.
An increase in mortgage rates—monthly mortgage payments are now 60% higher than a year ago—likely contributed to a shift toward less expensive homes. Though home sales in all three price points are lower than they were during the same period in 2021.
Metrics from key metros:
New York, New York
- Inventory YoY change: -2.8%(low-tier), -3.8% (middle-tier), 0%(high-tier)
- Sales YoY change: -18.8%(low-tier), -21.8%(middle-tier), -23.5%(high-tier)
Los Angeles, California
- Inventory YoY change: 34.9% (low-tier), 27.5 (middle-tier), 19.5%(high-tier)
- Sales YoY change: -24.3% (low-tier), -27.3% (middle-tier), -27%(high-tier)
Chicago, Illinois
- Inventory YoY change: -11.1%(low-tier), -9.8%(middle-tier), -18%(high-tier)
- Sales YoY change: -14.2% (low-tier), -25.5%(middle-tier), -23.3%(high-tier)
Dallas-Fort Worth, Texas
- Inventory YoY change: -0.5%(low-tier), 8.3%(middle-tier), 14.3%(high-tier)
- Sales YoY change: -11.2%(low-tier), -19%(middle-tier), -25.9%(high-tier)
Philadelphia, Pennsylvania
- Inventory YoY change: -7.3%(low-tier), -3.5%(middle-tier), -4%(high-tier)
- Sales YoY change: -2.1%(low-tier), -11.7%(middle-tier), -14.5%(high-tier)
The takeaway:
“Buyers are stretched thin when it comes to affordability, and they are flocking to the lowest-priced homes on the market to get their foot in the door,” said Zillow Senior Economist Nicole Bachaud. “Still, the less frenzied market compared to last year will feel like a breath of fresh air for those buyers who haven’t been priced out. It’s not yet a buyer’s market, but it’s becoming a better time to buy, with more time to consider options and less chance of being dragged into a bidding war. Demand is lighter for homes at the top end of the market, and owners appear to be reluctant to sell and move to a different home that will presumably come with a much higher monthly payment at today’s mortgage rates.”
Read the full report here.
