If you're currently looking to buy a home, the category of homes that is currently the more affordable for the average buyer may surprise you. It seems reasonable that cheaper homes should be the most affordable, but things just aren't what they seem in the current overheated housing market conditions.
Brand new research into home price growth across the US property market reveals some surprising trends. Finally, there's some good news for buyers tired of chasing too few homes that are out of their price range to begin with. It turns out that the place where you really should be looking is the sweet spot of mid-priced homes that tend to be more affordable initially.
The research, by real estate specialists at Redfin, shows that it's the homes at the two extremes of the home price range spectrum that have increased in value the most. This has placed luxury homes in the $1-milliton-plus price range even further out of reach of most buyers. Home values in this category have skyrocketed since the start of the pandemic, increasing by a huge 25 percent.
At the same time, as too few buyers chase too few cheaper properties, homes in the cheapest price category with a median price of $108,000 have also seen huge increases of 18.7 percent - topped only by the luxury market. Competition for these homes is perhaps less fierce than in other categories – this is the only type of home that has seen a meaningful increase in the number of listings year-on-year (11.3 percent). In terms of value for money, though, a near-twenty-percent price hike will have hit buyers with the lowest budgets hard.
If you are looking for the best value for money in the current housing market, you should be looking for homes in the middle tiers of the market, priced at between $198,000 and $300,000. The competition will be fierce, with active listings in decline and the average time it takes for a home in this category to sell averaging just 15 days.
However, it is the mid-priced homes that have experienced the least dramatic price hikes, with values for homes with a median price of $198,000 rising by 13 percent year on year. That's still a big increase, but these are pandemic times, and at least it's not nearly a quarter of the home value. Redfin Chief Economist Daryl Fairweather said: 'Surging prices can be especially problematic for first-time and lower-income homebuyers, but the good news is that the supply of the country’s most affordable homes is growing. That means there could be more homes to choose from and less competition for buyers in that segment of the market.'
For now, buyers looking for mid-priced homes will need to act quickly, but they also will be rewarded with fairer priced, more affordable real estate.