Lower-priced homes are seeing more market competition as overall higher home prices combined with high mortgage rates stretch buyers’ budgets thin.
Inventory, sales and price cut trends show home buyer demand has decreased overall, but for those still buying, a new Zillow report showed that the lowest-priced homes in each market are facing stronger competition than mid- and high-priced homes. This reversal of a pandemic trend is likely driven by the fact that monthly payments on a typical mortgage are 60% higher than they were a year ago, Zillow’s analysis showed.
“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.
At the end of July, the report showed that inventory in the most expensive third of the housing market was up 11% month over month, and 19.3% higher than a year earlier. Inventory in the middle third was up 12.7% month over month and 17.3% annually. Inventory is growing in the lowest-priced third as well, but only 11.2% month over month and 10.4% year over year.
During the same period in 2021, inventory in the least expensive tier was growing on a monthly basis at nearly twice the rate of the most expensive homes, according to Zillow. Home sales at all price points are lower than they were during the same period in 2021.
U.S. home sales are down 24.1% year over year as of June, according to Zillow’s data.