As the housing market rebalances post-pandemic, prospective buyers are prioritizing affordability and boosting demand for low-priced homes. Mortgage rates are inching higher and soaring home prices continue to break new records, causing buyers to go toe to toe for the lowest-priced homes in each regional market, but inventory is lagging behind, Zillow reports.
By the end of July, inventory in the most expensive third of the housing market was up 11% month-over-month and 19.3% year-over-year, while housing inventory in the middle third was up 12.7% month-over-month and 17.3% annually. Though still strong, inventory in the lowest-priced third grew by 11.2% month-over-month and 10.4% year-over-year during the same period, likely due to increased sales activity leaving few available homes behind on the market.
During the bulk of the pandemic, buyers shopping in the middle and top price tiers faced the most competition. The annual deficit in for-sale inventory dipped the most in the top two price tiers in 2020, and was slower to recover in 2021. All the while sales remained elevated, indicating the relatively lower inventory resulted from strong demand.
Now, with higher mortgage rates and after more than a year of record price gains, the lowest-priced homes in each market are attracting the most buyers.