July saw pending sales of starter homes rise 10.2% year over year, potentially signaling a thus-far sluggish market turning the corner as the real estate world waits with bated breath for rates to improve more meaningfully.
The annual gain brought pending sales of starter homes to their highest point since October 2022. Starter homes — the lowest price tier tracked by Redfin — were the only price category that saw pending sales grow year over year in July. Pending sales of middle-priced homes (with sales prices in the 35th to 65th percentile of the market) dropped 6.5% annually in July. Pending sales of more expensive homes fell even more, with upper-price homes (in the 65th to 95th percentile) down 10% and luxury homes (within the top 5% of market prices) down 7.9%.
Closed sales of starter homes did dip annually in July, backtracking by 0.6%. But that still bettered other price tiers, with middle- and upper-price homes downshifting by 3.9% and 3.4%, respectively.
With rates sliding and hope for larger cuts on the horizon, the most recent data suggests that first-time homebuyers, who are more sensitive to rate changes than repeat buyers, may be starting to come out of hibernation.
“The overall market remains sluggish, but we are beginning to see first-time homebuyers come off the sidelines, buoyed by falling mortgage rates and an increased number of homes hitting the market,” said Sheharyar Bokhari, Redfin’s senior economist. “Not only do you have young families and investors looking at starter homes, you also have buyers who have been forced to consider less-expensive options due to near-record home prices. More buyers means more sales, but so far we aren’t seeing prices skyrocket, because the rising number of homes hitting the market is enough to satisfy the increased demand—a positive outcome for both buyers and sellers.”
“Lower-priced homes are really moving right now, especially since rates went down to around 6.5%,” confirmed Derrell Skillman, a Redfin agent in San Antonio. “We are seeing a lot of younger buyers looking at smaller starter homes. They don’t want a big backyard and a pool, they just want something efficient, with minimal ongoing maintenance required.”
