The tables turn as low-priced homes attract the strongest competition

During most outbreaks, buyers in the middle and high price ranges faced very strong competition – inventory was relatively low and there were many sales. Right now, the inventory of affordable homes is very tight as the sales gap closes.

“Buyers are stretched thin on affordability, and they’re flocking to lower-priced homes on the market to get their foot in the door,” Zillow senior economist Nicole Bachaud said. Still, a market that’s not so tumultuous compared to last year feels like a breath of fresh air for undervalued buyers.

“It’s not yet a buyer’s market, but it’s becoming a better time to buy, with more options to consider and less chance of being drawn into a bidding war,” Bachad explained. “Demand is light for homes at the top end of the market, and owners seem reluctant to sell and move to another home, which may come with much higher monthly payments at today’s mortgage rates.”

Changes in inventory, sales, and price reductions show that the market is in a state of balance after perhaps being more competitive than ever. Home sellers are adjusting their expectations to current reality, and buyers have more bargaining power than they have since the pandemic began. Still, home prices are at or near record highs, pushing buyers staying in the market toward homes at the lower end of the price range.

At the end of July, inventory in the third-most expensive housing market was up 11 percent month over month. Similarly, middle third stocks rose 12.7% month-on-month and 17.3% year-on-year. Inventory is growing in the lowest third, but only at 11.2% month over month and 10.4% year over year. In the year During the same period in 2021, inventory at the most expensive level was growing at nearly double the monthly rate of the most expensive homes.

Home sales at all price points are lower than they were during the same period in 2021. More homes sold than any year since 2006. The year-over-year sales decline — U.S. home sales fell 24.1% year-to-date through June — was third in the middle and high end of the market compared to the low end. In the week ended June 20 — the most recent weekly data available — home sales in the lowest-priced tier fell 14.2%, with annual declines of 20.3% and 25.4% in the middle and high-priced tiers, respectively. Homes in the lower price bracket accounted for 26.7% of sales that week in 2022, but only 24.8% of sales in the same week a year ago.

Along with inventory and sales volume, the share of listings with price reductions reflects strong demand for lower-priced homes. For most of the outbreak, the share of listings with price reductions tracked price levels similarly. In the past few months – as Mortgage rates A higher share of the epidemic lows – mid- and high-priced listings are seeing price cuts as sellers struggle to attract buyers.

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