Affordable Homes Sales Outperform Luxury Homes
Redfin reported a supply surge for the most affordable US homes as mortgage forbearance ends.
Sales of the most affordable homes in the U.S. rose 11.3% year over year in the fourth quarter of 2021, according to a new report from real estate brokerage Redfin. Meanwhile, sales of luxury homes dropped 16.3%.
Sales of affordable homes are on the rise as the job market strengthens, especially for lower-wage workers, and real estate investors buy a record share of US homes.
At the same time, inventory in the most affordable price tier is up as the end of pandemic-driven mortgage forbearance and foreclosure moratorium policies encourages Americans to put their homes on the market.
“With the end of both mortgage forbearance and the foreclosure moratorium, many homeowners who don’t have much cash in the bank are choosing to sell their homes to clear their mortgage debt, providing plenty of supply to meet the high demand,” Redfin Chief Economist Daryl Fairweather said.
“Not only is there demand from workers who are now earning higher wages, but investors, who have an appetite for lower-priced homes, are buying up properties at record rates.”
To be sure, luxury sales are still elevated above pre-pandemic levels—sales were up by nearly 27% from the last quarter of 2019 to the last quarter of 2021—but the initial pandemic-driven frenzy for high-end homes is calming down.
Meanwhile, the number of the most affordable homes for sale rose 18.6% in the fourth quarter, making it the only tier to experience an inventory increase. Supply of luxury homes fell 21% during the same time period, the biggest drop of all five price tiers.
Affordable Homes Listings in Q4 up 31% YoY
The uptick in affordable homes for sale is partly because of owners putting their homes on the market due to the end of mortgage forbearance and the foreclosure moratorium. New listings of the most affordable homes rose 31% year over year in the fourth quarter, while new listings in the other tiers either declined or grew by less than 5%.
By contrast, the typical luxury home for sale during the fourth quarter spent 39 days on the market, 18 fewer days than a year earlier. The most affordable homes spent less time on the market (28), as is typical for lower-priced homes. That’s six fewer days than the year before.