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Entry-level homes have become more popular during the pandemic, gaining at least 60% more value since February 2020 in seven of the 50 largest markets, with Tampa, Richmond, and Charlotte leading the charge.
Zillow noted that mortgage interest rate hikes impact monthly payments negatively as prices rise. That’s why top-tier home values are falling fastest annually in some of the most expensive markets: San Francisco (-14%), San Jose (-11%), and Seattle (-11%).
The “rate lock-in effect,” the phenomenon that discourages current homeowners from listing their homes for sale and thus giving up their low mortgage rate, is also contributing to a lower flow of new listings across price tiers, especially on entry-level buyers in expensive West Coast markets.
There are 1% more homes available for sale in the bottom price tier compared to 8% and 13% more in the middle and top tiers. San Jose, San Francisco, Sacramento, Portland and Seattle all have fewer than half as many new bottom-tier listings in March compared to last year, the analysis showed.
“In the recent past, entry-level shoppers had an easier time finding discounts than their well-heeled colleagues, but that comparative benefit is gone now, too,” Zillow said. “The share of mid- and top-tier homes that sold above list price rose far above the bottom-tier share through most of the pandemic.
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