This spring buying season, entry-level home shoppers looking for houses in the bottom price tier can expect a tighter market compared with shoppers in the middle and upper price tiers. Prices for entry-level homes are up 8% year-over-year nationally, Zillow reports, with some metros such as Tampa, Fla., Richmond, Va., and Charlotte, N.C., seeing appreciation of more than 60% since February 2020. In contrast, home values in the top tier fell by 1% for the first time since 2012.
Though it was typical for lower price-tier homes to appreciate at a faster pace compared to middle and top price-tier homes before 2020, the pandemic accelerated that growth such that buyers who were not ready or able to take advantage of historically low interest rates will find themselves in a significantly more expensive market with less purchasing power. For some buyers, this means that they are unable to enter the market at all. For others who can still afford to buy, this may mean that they set their sights on homes at a lower price point, increasing competition on the lower-priced end of the market.