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Even as record-high high home prices dominate local housing markets across the country, new data suggests that sales of cheaper starter homes are on the rise.
Pending sales of starter homes climbed 10.2 percent year over year which is the highest level since nationwide October 2022 according to a recent report from Redfin. In comparison, sales of middle-price and upper-price homes are down 6.5 percent and 10 percent respectively. Economists at the brokerage and listings portal defined “starter homes” as ones whose sale prices fell into the 5th-35th percentile,
“The 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,” Redfin Senior Economist Sheharyar Bokhari said in a statement. “Not 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. More buyers means more sales, but so far we aren’t seeing prices skyrocket, because the rising number of homes hitting the market is enough to satisfy the increased demand – a positive outcome for both buyers and sellers.”
In Greater Boston, pending sales of starter homes have increased 22.6 percent year-over-year. Overall the market for these homes is strong as active and new listings saw increases of 27.5 percent and 34 percent respectively.
The Boston metro area outperformed similar metros such as New York, New York and Seattle, Washington as new listings grew by 17.8 percent and 19.88 percent in those locations.
While these homes are at the lower end of the market, the barrier to entering the market continues to increase. In Greater Boston, the median sale price of these homes in Boston sits at $490,000 which is a 7.69 percent increase year-over-year. Across the country, the median sale price of starter homes increased 4.2 percent.
“Lower-priced homes are really moving right now, especially since rates went down to around 6.5%,” said Derrell Skillman, a Redfin Premier agent in San Antonio. “We are seeing a lot of younger buyers looking at smaller starter homes. They don’t want a big backyard and a pool, they just want something efficient, with minimal ongoing maintenance required.”
