Starter-Home Sales Continue Upward Trend

More homes on the market generally means more sales, especially at the lower end of the price spectrum, where starter home sales jumped nearly 5% in October, Redfin reports.

Mid- and high-priced houses also moved ahead during October from the same time a year ago, but at a 4.9% year-over-year increase, starter homes led the pack.

Starter-home sales have been on an upward trend for more than a year, consistently outperforming the rest of the market through 2025, as buyers shift their focus to the most affordable homes available, the real estate brokerage firm reports.

And pending sales are continuing the trend, with pending sales in the starter tier up 5.5% versus just 1.1% in the mid-priced range and 1.1% in the higher tier.

Chen Zhao, head of economic research at Redfin, describes the situation as a two-edged sword.

“Conditions are improving, with more listings and steadier prices, but many buyers are only turning to this tier because they have been priced out of higher tiers,” said Zhao. “That means sales at the low end of the market are relatively strong, but it also means that first-time buyers may find themselves competing with move-up or move-down buyers.”

Currently, starter-home prices are growing at the second-slowest rate in a decade. The typical price for starters rose 2% year-over-year to $260,000 in October, the second slowest growth rate in the past decade, trailing only April 2024's 1.8% increase when mortgage rates were spiking above 7.5%.

The median price of mid- and high-priced homes rose 1.8% and 3.1% respectively, also near decade-long lows for price growth.
Starter-home prices are rising so modestly in part because there are more of them on the market. Active listings of starter homes rose 13% in October, pushing inventory to its highest October level since 2016.

Inventory also grew in other price tiers, but not as quickly. Active listings of mid-priced homes increased 9.5% from a year earlier to the highest October level since 2019, and high-priced homes rose 8.3% to the highest October level since 2020.

Meanwhile, Redfin also reported that overall inventory growth has lost some steam heading into the holidays. Growth in total supply is slowing, new listings are stalling and de-listings are becoming more common, the company explained.

The supply of homes for sale rose 5.1% year-over-year during the four weeks ending November 30 — the smallest increase in nearly two years. At the same time, new listings rose just 0.9%, the smallest uptick in two months, and pending sales fell 2.5% from a year earlier.

Even though mortgage rates have slipped a bit, buyers are backing off because costs are still high. Sale prices are up 2.2% — the biggest increase in nearly eight months — and mortgage rates are still sitting above 6%.

Another factor: A cloudy economic outlook.

“The pool of buyers is small partly because we’re entering the slow season for real estate, but it’s also because houses are expensive, rates are elevated, and people are feeling cautious about their pocketbooks,” said Carlos Castillo, a Redfin agent in Los Angeles.