Entry level home values in the United States for properties popular with first time buyers have increased by 8% in the last year, twice as fast as top tier home prices, new research shows.
It means that first time byers are facing stiff competition and buyers looking for more expensive homes have more choice, according to the data from the latest real estate market report from property firm Zillow.
The data also shows that the number of expensive homes for sale has dropped slightly, but there are far fewer entry level homes on the market with supply in this sector down by 9% year on year.
Nationally, home values rose 5.4% over the past year, to a median home value of $186,100 while rents increased by 2.9% to a Zillow Rent Index of $1,407.
Home values for the most expensive homes on the market, which at one point in February 2014 were growing at an average of 7% annually, have stabilised. Those homes have been gaining value at about 4% each year since the beginning of 2015.
According to the index report the stark differences between the top and bottom of the housing market shed light on the two very different experiences home buyers will face in most markets this summer.
Buyers looking for the most expensive homes will find slashed prices, more options and less competition. It’s a much different story for first time buyers, who will be up against rising prices, low inventory and tough competition, with homes selling over asking price in many of the nation’s hottest housing markets.
Over the past 18 months, the percent of listings with a price cut among the most expensive third of homes has slightly increased, while the percent of listings with a price cut among entry level homes have decreased.
Indeed, since the beginning of 2015, top tier homes have had the most price cuts which the report says is another sign that top tier buyers are having an easier time shopping for homes in the current market.
The rental market is also stabilizing at the high end. A recent Zillow analysis found that rents aren’t rising as quickly for apartments in more expensive zip codes.
‘The top of the market is starting to stabilise, and people are beginning to take notice. Buyers looking for entry level homes are having bidding wars in many markets, while it’s not uncommon for high priced homes to stay on the market a few months longer,’ said Zillow chief economist Svenja Gudell.
‘The housing market is much more forgiving for current homeowners looking to move into a bigger, more expensive home. These buyers can be a bit more selective, and may even get a good deal,’ she added.
Buyers looking for a home at the top of the market will have more to choose from than those looking for a home in the bottom third of the market, which are often sought after by first time home buyers.
The number of homes for sale at the top of the market has remained flat over the past year, while inventory in the bottom third is down almost 9%. Some markets are worse than others. In Portland, for example, there are almost 40% fewer entry level homes for sale than a year ago.
