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There are more starter homes ready for people to buy, but they are not getting any cheaper. Still, there\u2019s some increased interest among buyers. Pending sales of starter homes leaped around 10% in July from a year earlier, to their highest level since October 2022, according to a recently published analysis<\/a> by Redfin. It shows \u201cthere may be signs of life for first-time homebuyers at the lower end of an otherwise sluggish market,\u201d Redfin said.<\/p>\n To be clear, a pending home sale means a seller has received and accepted an offer on their home, but the deal hasn\u2019t been closed. While pending home sales of starter homes rose, middle-tier homes, by contrast, fell 6.5% during the same period. Upper-priced pending home sales fell, too, by 10%. And pending home sales of luxury homes dropped close to 8%.\u00a0<\/p>\n All the while, sale prices for each tier rose. Starter home prices increased slower than others; they rose slightly more than 4%. Whereas, prices of homes in the middle and upper categories rose around 5%. And it all has to do with inventory. There are more starter homes at the moment, and that keeps prices from skyrocketing. The number of starter homes on the market rose nearly 19%. Houses in the other tiers didn\u2019t even see a 5% bump in active listings.<\/p>\n Mortgage rates<\/a> are a key reason why. They began to dip in mid-July and have mostly continued to fall since. At the moment, the 30-year fixed mortgage rate, measured weekly, is 6.46%. Daily rates are a tad lower. Either way, it\u2019s a substantial difference from October last year when they reached a more than two-decade high. In July, following an initial drop, some buyers gained more than $20,000 in purchasing power<\/a>, so it\u2019d be even more now.<\/p>\n \u201cThe overall market remains sluggish, but we are beginning to see first-time homebuyers come off the sidelines, buoyed by falling mortgage rates and an increased number of homes hitting the market,\u201d Redfin senior economist Sheharyar Bokhari. \u201cNot only do you have young families and investors looking at starter homes, you also have buyers who have been forced to consider less-expensive options due to near-record home prices.\u201d<\/p>\n He continued: \u201cMore buyers means more sales, but so far we aren\u2019t seeing prices skyrocket, because the rising number of homes hitting the market is enough to satisfy the increased demand\u2014a positive outcome for both buyers and sellers.\u201d<\/p>\n Still, while pending sales are a good indicator of where things are going, closed sales of starter homes actually fell in July, but not by much\u2014less than 1%. On the other hand, sales of middle and upper-tier homes declined nearly 4% and more than 3%, respectively. So because pending sales are showing some positive movement, \u201cthat means future starter home sales should strengthen even more in August due to July\u2019s spike in pending sales,\u201d the analysis read.\u00a0<\/p>\n A San Antonio-based Redfin agent, in the analysis, said: \u201cLower-priced homes are really moving right now, especially since rates went down to around 6.5% \u2026 We are seeing a lot of younger buyers looking at smaller starter homes. They don\u2019t want a big backyard and a pool, they just want something efficient, with minimal ongoing maintenance required.\u201d\u00a0<\/p>\n In the Texan city, pending starter home sales were actually up 22% in July, and prices dropped (again, because of increased inventory). Austin, West Palm Beach, Fort Lauderdale, and Dallas, also saw declines in starter home values.<\/p>\n This isn\u2019t to say inventory or prices are anywhere close to \u201cnormal.\u201d The number of starter homes on the market is still 30% less than five years ago; as of earlier this year, the salary level needed<\/a> to buy a starter home had nearly doubled since the pandemic; and the $200,000 starter home is going extinct<\/a>. In this latest analysis, the median sale price of a starter home is $250,000, on a national level. It\u2019s lower in some places, and a lot higher in others. In Los Angeles, the median price of a starter home is $610,000; in San Diego, it\u2019s $650,000; and in San Francisco, it\u2019s $945,000.<\/p>\n And it isn\u2019t just a California thing. In Seattle, the median sale price of a starter home is $555,000; in New York, it\u2019s $450,000; and in Denver, it\u2019s $412,000.<\/p>\n<\/div>\n\nRecommended reading:<\/strong>
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