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Zillow Finds Affordable Homes, Increasing Competition

As homebuying demand cools from a record pace in 2021, competition for affordable housing is likely to be at its strongest as increasing affordability barriers strain buyer budgets. , revealed in Zillow’s new analysis.

Throughout most of the pandemic, buyers shopping in the mid- and top-end tiers faced the toughest competition. Inventories were relatively low and sales were high. The cheapest housing inventory is now the tightest, while the sales gap is closing.

Zillow senior economist Nicole Bachaud said: “Still, a market that is less enthusiastic than last year will feel like fresh air for buyers who have not lowered prices. Demand for top-of-the-market homes is low, and owners expect their monthly payments to be much higher at current mortgage rates. He seems reluctant to sell and move to another house that could afford it.”

Changes in inventories, sales and markdowns indicate that the market is in the midst of a rebalancing after perhaps its most competitive period to date. Home sellers are adjusting their expectations to the current reality, and buyers have more bargaining power since the outbreak of the pandemic. Still, home prices are at or near record highs, and buyers who remain in the market are turning to homes on the lower end of the price spectrum.

At the end of July, inventory in the most expensive third of the housing market was up 11% month-on-month and 19.3% year-on-year. Likewise, inventories in the middle third increased by 12.7% month-on-month and 17.3% for the year. Inventories also increased at the third lowest price, but only 11.2% m/m and 10.4% y/y. During the same period in 2021, inventories of the cheapest tier were growing monthly at almost twice the rate of the most expensive homes.

Home sales across all price ranges are lower than in the same period in 2021, when more homes sold than in any other year since 2006. – As of June, US home sales are down 24.1% year-on-year – A third of mid- and high-end tiers are steeper than the bottom end. In the week ending June 20 (latest weekly data available), lowest-end home sales fell 14.2% for the year, while mid- and high-end home sales fell 20.3% and 25.4%, respectively. Did. Bottom-tier homes accounted for 26.7% of sales for the week in 2022, but only 24.8% for the same week the year before.

In addition to inventory and sales volumes, the share of discounted listings also indicates increased demand for affordable housing. For much of the pandemic, the share of discounted listings tracked similarly across price ranges. As a result, more portions of the mid- and high-end listings have been discounted.

Image: Dillon Kydd on Unsplash