6/27/2016 by Stephen Perrino
Competition continues to grow in the bottom third of the price level, putting upward pressure on entry-level home prices, with price levels increasing significantly faster than more expensively priced homes, according to this Zillow Market Report. Entry-level home prices, usually targeted by first time home buyers, grew at nearly twice the rate (about 8 percent) over the past year as top-tier home values.
The number of high priced homes for sale has remained relatively constant, but the entry-level tier has had a diminishing inventory, making it difficult for first time home buyers and those looking to downsize to find suitable housing and forcing them to pay more for the limited inventory that is available. This makes it imperative that buyers looking to find a home in this entry-level price range be as prepared as possible to make an offer when they do find the right house that meets their needs and their budget. Alternately, the slowdown in prices in the higher end price market suggests that buyers looking in that upper level should find reduced prices, more options, and less competition for those houses, making at good time to buy for those looking to expand into a better home in a stronger neighborhood. It’s a stark contrast to the tough, competitive market that is in front of entry-level first time home buyers.
Over the past 18 months, the number of homes on the market that have reduced list price have slightly increased, while entry-level priced home list price reductions have decreased over the same period. This further indicates that we are dealing with two very distinct markets with there being a seller’s market with rising prices on the low end while the higher end home buyer has a bit of a buyer’s market situation going on.
“The top of the market is starting to stabilize, and people are beginning to take notice,” says Zillow Chief Economist Dr. Svenja Gudell. “First time home buyers looking for entry-level homes are having bidding wars in many markets, while it’s not uncommon for high priced homes to stay on the market a few months longer. The housing market is much more forgiving for current homeowners looking to move into a bigger, more expensive home. These buyers can be a bit more selective, and may even get a good deal.”
It’s hard to pin down one specific reason for this price stability at the top, even as the bottom and middle sections of the market continue to rapidly increase. It’s very likely the result of several factors.
The inventory of low- and middle-tier homes for sale fell by 8.9 percent and 9.7 percent, respectively, in May compared to a year ago. Top-tier inventory, over the same period, fell a scant 0.5 percent. Don’t forget rising rents. The U.S. median rent in May was $1,407 per month, up 0.3 percent from April and 2.9 percent from May 2015, according to the Zillow Rent Index. U.S. rents have grown year-over-year for 45 consecutive months.
Looking ahead, Zillow expects national home values to continue growing, rising another 3.1 percent through May 2017 to a Zillow Home Value Index of $191,800. U.S. rents are also expected to keep growing over the next year, at a 3.2 percent pace through May 2017 to a Zillow Rent Index of $1,452. It seems as though we’re going to have stiff competition, especially among first time home buyers and other entry-level price consumers in the Real Estate market for the foreseeable future.
Sellers looking to move up are in a very good position, able to get top dollar for their entry-level homes with a lot of options for them to seek a higher level property without much competition driving the prices out of their range. If you’re thinking about selling, be sure to check out our 13 things to do before listing your home blog. First time home buyers? Check out our free first time home buyer’s guide.
The above article, “First Time Home Buyers Finding Strong Competition with Entry-Level Home Prices Rising”, has been provided by Stephen Perrino as part of our homeowner tips series. Stephen is a professional, full-time Realtor with PAIVA Realty Group and has helped many people buy and sell homes throughout the entire Greater Providence area for many years! If you are in the market to BUYor SELL a home, he would love to connect with you and can be reached via email at [email protected] or by phone at 401-206-8907.
Are you thinking of selling your home? I’m very good at marketing homes to sell quickly, and for more money. If you’re a first-time home buyer then you’ll be in good hands. I’ve helped countless first-time home buyers through the entire process of buying that first home! I have a real passion for helping folks buy and sell homes here in the great state of RI and I would love to connect with you!