Affordable Home Sales Are up While Luxury Home Sales Decline: Report

A 'for sale' sign is seen in front of a home in Miami, on May 30, 2019. Joe Raedle/Getty Images

Fourth-quarter sales of the most affordable homes were up 11.3 percent year-over-year while luxury home sales plummeted 16.3 percent in the same period, according to new data from Redfin Corp.

What Happened

Affordable homeownership opportunities have been elusive in many parts of the country for years, but Redfin attributed much of this new uptick in affordable homes for sale to owners putting their properties on the market as the federal government’s COVID-19 pandemic-era mortgage forbearance and foreclosure moratorium programs came to an end.

As a result, new listings of the most affordable homes rose 31 percent year-over-year in the fourth quarter, while new listings in other housing market tiers either grew by less than 5 percent or were in decline.

“The market for homes at lower price points is booming for a few reasons,” said Redfin Chief Economist Daryl Fairweather. “Not only is there demand from workers who are now earning higher wages, but investors who have an appetite for lower-priced homes are buying up properties at record rates.

“And with the end of both mortgage forbearance and the foreclosure moratorium,” Fairweather added, “many homeowners who don’t have much cash in the bank are choosing to sell their homes to clear their mortgage debt, providing plenty of supply to meet the high demand.”

What Else Happened

As for the decline in fourth-quarter luxury home sales, Redfin pointed to the surge in this sector’s sales activity in the fourth quarter of 2020 when affluent buyers took advantage of historically low mortgage rates and the new focus on remote work. Based on this, the supply of luxury homes fell 21 percent year-over-year in the fourth quarter, compared to the 18.6 percent increase in the supply of affordable homes over the same period.

Prices for luxury homes continued to rise—a 17.3 percent year-over-year spike to about $1 million. The prices of the most affordable homes also rose, with a 10.9 percent annualized uptick to $127,500. And somewhere in-between, the median sale price for mid-priced homes jumped 18.8 percent year-over-year to $310,000, the biggest increase of all the price tiers.

Also Happening

In other housing market data news, the Mortgage Bankers Association (MBA) reported that mortgage applications decreased 7.1 percent for the week ending Jan. 21 from the previous week. The MBA’s Purchase Index was down 2 percent week-over-week while its Refinance Index fell 13 percent—the latter was also 53 percent lower than the same week one year ago.

“All mortgage rates in MBA’s survey continued to climb, with the 30-year fixed rate rising for the fifth consecutive week to its highest level since March 2020,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The 30-year fixed-rate is now 77 basis points higher than it was a year ago.

“Unsurprisingly,” Kan added, “borrower demand for refinances subsided, with applications falling for the fourth straight week. After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance. Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them.”

By Phil Hall

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