Home prices have been the subject of much discussion throughout the recent housing market struggles. The current housing market correction has been slowing price growth, and luxury homes are now seeing year-over-year declines. However, a new Realtor.com report found that starter homes prices are still seeing growth in many markets.
Realtor.com’s latest report compares year-over-year price changes for starter and luxury homes to see how each segment of the real estate market has fared.
Largest drops in luxury home prices:
- Salt Lake City, Utah has a luxury home price of +$1.15 million, which was a 28.1% decrease from the three-year price peak. From the pandemic boom, luxury home prices here had hit 52% YoY price growth in January 2021. In 2022, however, those prices dropped 24%.
- Sacramento, California saw a 18.2% decrease from the three-year price peak, with a luxury home price of +$1.35 million. Prices here grew 38% YoY in January 2021, but now homes that would have sold for $2 million are going for $1.5 million.
- Houston, Texas has a luxury home price of +$799,000, which was an 18.1% decrease from the three-year price peak. The 2020-2021 boom had seen an increase of 30% YoY.
Largest gains in starter home prices:
- Nashville, Tennessee saw a price increase of 10.8% from last year and 43.7% over the past three years, with a starter home price of $349,900. REALTORS® in the area explained that lots are expensive, driving up housing prices as new construction is aimed at higher-priced buyers.
- San Diego, California has a starter home price of $678,470, a 13.5% increase from last year and a 29.9% over the past three years. The city is struggling with the inventory shortage that has recently been plaguing the housing market, causing elevated prices.
- Houston saw a price increase of 4.5% from last year and 25.3% over the past three years, with a starter home price of $255,200. The city’s starter homes are the least expensive on the list, but the YoY increase of more than 4% is still a troubling high.
Major takeaway:
“On one end are starter homes, traditionally smaller and more affordable, geared toward first-time homebuyers; on the other, luxury homes, the spacious mansions with every amenity imaginable marketed to the wealthy,” said Evan Wyloge, data journalist at Realtor.com and author of the report. “Each market has faced its own highs, lows, and distinct challenges.”
“Luxury purchases are more discretionary. For starter homes, different forces are at work,” said Danielle Hale, chief economist at Realtor.com. “If you think of luxury home purchases as discretionary, starter home purchases are almost the opposite. It’s more about timing and strategy.”
“You see a correlation between the stock market and real estate, simply because stocks make up a greater portion of the financial portfolios of high net worth buyers,” Hale continued. “When people in the market for a house are most looking for affordability, that’s challenging now.”
For the full report, click here.
