As homebuying demand cools, competition is now hottest for the lowest-priced homes, according to Zillow.
Throughout the pandemic, potential buyers in the middle and top price tiers faced the strongest competition; inventory was lower, and there were more sales. Now, inventory for the least-expensive homes is tightest while the sales gap has closed.
“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,” Zillow Senior Economist Nicole Bachaud said in a release. “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 buyers’ 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.”
At the end of July, inventory in the most expensive third of the housing market was up 11 percent month-over-month and 19.3 percent year-over-year. Similarly, inventory in the middle third was up 12.7 percent month-over-month and 17.3 percent annually. Inventory is growing in the lowest-priced third at 11.2 percent month-over-month and 10.4 percent 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.
Home sales at all price points are lower than they were during the same period in 2021. The year-over-year sales decline — home sales are down 24.1 percent year-over-year as of June — has been steeper in the mid- and high-priced market than in the lowest price tier. In the week ending June 20, home sales in the lowest price tier were down 14.2 percent annually, compared with 20.3 percent in the mid-priced tier and 25.4 percent in the high-priced tiers. Homes in the bottom price tier made up 26.7 percent of sales that week in 2022, but only 24.8 percent of sales during the same week a year earlier.
Along with inventory and sales volume, the share of listings with a price cut also indicates heavier demand for lower-priced homes. For much of the pandemic, the share of listings with a price cut tracked similarly across price tiers. During the past few months, a larger share of mid- and high-priced listings have received a price cut as sellers are having a harder time attracting buyers