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- Prices have recovered after falling at start of the pandemic
- End of eviction moratorium may be driving sales of most affordable homes
The median sale price of U.S. luxury homes jumped 25.8% year over year in the second quarter, while the median sale price of the country's most affordable homes rose 18.7%, according to a new report from Redfin, the technology-powered real estate brokerage. By comparison, prices of mid-priced and affordable homes grew just 16% and 13.2%, respectively.
"Home prices and sales plummeted at the beginning of the pandemic, but have now more than recovered — especially in the luxury and most-affordable price tiers — due to low mortgage rates and strong homebuyer demand during the pandemic," said Redfin Chief Economist Daryl Fairweather.
"Surging prices can be especially problematic for first-time and lower-income homebuyers, but the good news is that the supply of the country's most affordable homes is growing,” Fairweather said. “That means there could be more homes to choose from and less competition for buyers in that segment of the market."
The report is based on an analysis that divided all U.S. residential properties into five price tiers — luxury, expensive, mid-priced, affordable and most affordable — based on Redfin estimates of the homes' market values. Any "record" referenced in the report dates back to 2013. Redfin noted that year-over-year gains may appear especially large due to the housing-market slowdown in the second quarter of 2020, when activity stalled due to restrictions imposed because of the pandemic.
Purchases of luxury homes in the U.S. surged 88.2% year over year in the second quarter, while purchases of the most affordable homes rose 56.8%. By comparison, purchases of homes in other price tiers increased between 30% and 45%.
Home sales have soared across the board during the pandemic as Americans have taken advantage of low mortgage rates and the flexibility to work from anywhere. But sales in the luxury and most affordable price tiers have seen especially large increases. For luxury homes, that's partly because affluent Americans have reaped the gains of a strong stock market and swelling savings accounts. For the most affordable homes, it's likely due in part to a rebound in investor activity. Home purchases by real estate investors — who commonly buy lower-priced properties — jumped to a record high in the second quarter.
"With the pandemic eviction moratorium coming to an end and many Americans priced out of homeownership, investors are keen on buying up inexpensive properties and turning them into rentals," Fairweather said. "A relative abundance of homes hitting the market in both the most affordable and luxury tiers has also enabled purchases in these segments to flourish."
The number of homes for sale in the most affordable price tier rose 11.3% year over year during the second quarter. The next-biggest increase was in the luxury tier, which saw supply grow 1.3%. Supply in the remaining three tiers either declined or grew less than 1%.
"The government's pandemic mortgage forbearance program is coming to an end, which is likely boosting the supply of America's most affordable homes," Fairweather said. "Some homeowners are putting their properties on the market because they're concerned about being foreclosed upon when forbearance dries up, while other owners of affordable homes are selling because they want to avoid the increase in seller competition that's likely to occur when forbearance ends."
To read the full report, click here.