Starter homes are starting a little bit higher these days, according to a Redfin report.
The typical U.S. starter home sold for a record median price of $260,508 in August, rising 2.2% from a year earlier, as sales continued to outpace those of higher-priced houses. It was the 12th consecutive month that sales prices for starters increased.
For its analysis, Redfin divided houses into tiers based on the prices of homes sold over a rolling 12-month period. This report focused on homes whose sale price fell into the 5th–35th percentile, which it defined as starter homes. Mid-priced homes were those in the 35th–65th percentile, while high-priced homes were in the 65th–95th percentile.
Sales in August of houses for people just starting out on the housing ladder — or perhaps those moving down the ladder after years of ownership — increased 3.8% year over year. In comparison, sales of mid- and high-priced houses fell 0.6% and 1.2%, respectively.
At the same time, prices of mid- and high-priced homes grew by 1.4% and 2.7% year over year, respectively, to near-record highs of $370,000 and $575,000.
Pending sales of starter homes also are up, rising 3.1% year over year in August. Pending contracts of mid- and high-priced homes fell 0.1% and 0.8%, respectively.
“Starter homes are holding up better than other price points because they’re the most attainable option in a market where affordability is still stretched,” said Redfin Senior Economist Sheharyar Bokhari. “First-time buyers and downsizers alike are competing for the same pool of smaller, less expensive homes, which is keeping demand relatively strong even as higher tiers remain sluggish. For many households, stretching into the mid-tier isn’t feasible with high prices and elevated mortgage rates.”
There are a lot of starters on the market. Active listings of starter homes are up 16.4% year over year to the highest August level since 2016. Active listings of mid- and high-priced homes, on the other hand, grew 13.4% and 12.5%, respectively.
Despite these differences, it took roughly the same amount of time to sell across all price tiers, Redfin found. The typical starter home sold in 41 days in August, a week slower than last year, while mid- and high-priced homes took 40 and 41 days, respectively.
Just over a third of starter homes went under contract within two weeks in August, roughly the same as the higher-priced tiers.
Starter home sales increased most in Providence, R.I. (25.3%), Milwaukee (12%), and Riverside, Calif. (10.8%). But they declined most in San Antonio (-10%), Miami (-7.3%), and San Jose, Calif. (-5.8%).
