Starter-Home Sales Continue to Climb

Despite a slowdown in overall home sales, starter-home sales activity grew in October. According to a recent report from real estate marketing platform Redfin, starter-home sales increased by 4.9% year-over-year in October. Comparatively, sales of mid-priced homes and high-priced homes grew by just 0.7% and 0.8%, respectively.

A similar trend was observed for pending-home sales. Pending deals on starter homes grew by 5.5% year-over-year in October, while pending sales for mid- and high-priced homes grew by a respective 1.4% and 1.1%.

The increase in starter-home sales is likely due to ongoing affordability concerns in the housing market. Both first-time homebuyers and repeat buyers are looking to starter homes for their relatively low prices compared with the remainder of the market. 

Improved sales activity isn't causing starter-home prices to grow

While sales activity in the starter-home market grew, prices only inched up slightly in October. The typical starter home price rose by just 2% year-over-year to $260,000, the second slowest growth rate in the past decade. At the same time, mortgage rates staying below 6.5% over the past few months added to the starter-home market’s affordability.

Some cities are seeing more starter-home sales than others

In San Francisco, starter-home sales grew by 19.5% year-over-year in October. Additionally, in Providence, R.I., starter-home sales grew by 12%, and in Portland, Ore., they grew by 12.9%.

Meanwhile, more affordable markets that have seen new-home inventory grow over the past year saw a decline in starter-home sales. In San Antonio, starter-home sales fell by 9.6% year-over-year in October. In Detroit and Nashville, they fell by a respective 7.9% and 5.5%.