Starter-Home Sales Improve

Affordability continues to be a major challenge for first-time buyers, yet recent data show that they’re entering the housing market anyway. According to real estate marketing platform Redfin, sales of starter homes—homes whose sales price fell in the fifth to 35th percentile—rose by 3.9% year-over-year in June. This figure is the highest level recorded in two years. Comparatively, sales of mid-priced homes—which are in the 35th to 65th percentile of the market by sale price—fell 0.9% year-over year, while homes priced in the 65th to 95th percentile fell even further by 3.6%.

While prices of starter homes remain at a record high, price growth has been slowing for six consecutive months. June’s 3.1% pace was the slowest in a year.

A big reason for slowing price growth in the starter-home segment—and another reason why sales are rising—is soaring inventory, with the number of active listings rising 19% year over year to the highest level for June since 2017. That was the fastest growth among the price tiers.