Starter Home Sales Trended Up in July While Pricier Home Sales Fell

While pending sales of middle- and upper-price homes have fallen recently, pending sales of starter homes climbed 10.2% year-over-year in July, signaling signs of life in the first-time-homebuyer category. This increase is the highest level of pending sales for the starter home segment since October 2022, according to a Redfin report.

Pending sales of middle-price homes – those in the 35th to 65th percentile of the market – fell 6.5% in July compared with last year, the report found. Pending sales in the upper-price category – 65th to 95th percentile – fell more than 10% year-over-year.

Redfin speculated that starter home sales are strengthening on the recent decline in mortgage rates as first-time homebuyers are less likely to have a large down payment, making them more sensitive to rates that will impact monthly payments.

“The overall market remains sluggish, but we are beginning to see first-time homebuyers come off the sidelines, buoyed by falling mortgage rates and an increased number of homes hitting the market,” said Redfin senior economist Sheharyar Bokhari. “Not only do you have young families and investors looking at starter homes, you also have buyers who have been forced to consider less-expensive options due to near-record home prices. More buyers means more sales, but so far we aren’t seeing prices skyrocket, because the rising number of homes hitting the market is enough to satisfy the increased demand — a positive outcome for both buyers and sellers.”

The typical U.S. starter home sold for a record $250,000 in July, up 4.2% year-over-year, said Redfin. That price growth was slower than middle- and upper-price tiers, which rose 4.6% and 5% respectively. The number of starter homes on the market grew 18.9% year-over-year to the highest level since October 2022. Meanwhile, inventory in the middle- and upper-price tiers increased by just 4.1% and 1.6%, respectively, according to the report.

Starter home sales increased most in San Francisco, San Jose and Cincinnati. They decreased the most in Fort Lauderdale, West Palm Beach and Phoenix. The total number of starter homes for sale increased most in San Antonio, Fort Worth and Tampa, while only Milwaukee saw a decrease in active listings.

Starter homes sold fastest in Seattle at a median of seven days, followed by Montgomery County, Pennsylvania, and Warren County, Michigan. They sold slowest in Fort Lauderdale, West Palm Beach and Miami, the report said.