The supply of the country’s most affordable homes jumped a record 13 percent year-over-year in the third quarter, according to a recent Redfin report. The company attributes the gain to mortgage forbearance programs ending, prompting many owners of low-cost homes to put their properties on the market.
Redfin uses market values to divide residential properties into five price tiers: most affordable, affordable, mid-priced, expensive and luxury.
The supply of affordable homes for sale also grew at a record pace, rising 1.6 percent year-over-year in the third quarter. Meanwhile, housing supply in the other three segments fell in the third quarter, with the number of luxury homes dropping a record 21.2 percent, expensive homes dropping a record 19.9 percent, and mid-priced homes dropping 10.1 percent.
“The end of forbearance has forced many lower-income Americans to put their homes up for sale and become renters,” Redfin Chief Economist Daryl Fairweather said in a release. “This has caused the number of affordable homes on the market to surge, helping replenish inventory amid an acute housing shortage. It's a rainstorm after a long drought, but the drought isn’t over yet.”
Housing supply in both the most affordable and affordable tiers remains below historic levels despite the recent record increase. There were 78,000 active listings in the most affordable tier during the third quarter, compared with more than 100,000 during the same periods from 2013 through 2016. In the luxury tier, there were 158,000 active listings in the third quarter, the fourth-lowest level on record with Redfin.
“The luxury market remains strong, but is past its pandemic peak,” Fairweather said. “Now that life is somewhat back to normal and travel restrictions have been lifted, many affluent Americans are opting to spend their money on things other than housing.”
Purchases of luxury homes fell 7 percent year-over-year in the third quarter, and purchases of expensive homes fell 3.4 percent. The remaining tiers posted growth.
While the housing shortage is limiting sales, strong price growth and market speed indicate that buyer demand remained strong, according to Redfin. Median sale prices climbed at least 15 percent year-over-year in every tier in the third quarter.