According to a recent analysis by Zillow, entry-level home shoppers are facing an uphill battle in today’s real estate market. Despite the ongoing pandemic, prices for the most affordable homes are continuing to rise, putting pressure on buyers who are looking to break into the market. With fewer homes available for sale, competition is fierce, leaving many shoppers feeling frustrated and uncertain about their prospects of finding the perfect place to call home. Despite these challenges, experts recommend staying patient and prepared, and being ready to act quickly when the right opportunity arises.
Typical home values for the least-expensive one-third of houses rose 8% – nearly $13,000 – over the past year. Mid-level homes appreciated by 3% and the most-expensive houses depreciated by 1%, the first loss of value for the top tier since 2012.
Entry-level homes have exploded in value over the course of the pandemic across the U.S., gaining at least 60% more value since February 2020 in seven of the 50 largest markets, with Tampa, Richmond and Charlotte leading the charge.
Mortgage-interest rate hikes do more damage to monthly payments as home prices rise. This helps explain 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%).
A slight annual recovery in inventory has left out entry-level shoppers. There are just 1% more homes available for sale in the bottom price tier compared to 8% and 13% more in the slower-moving middle and top tiers, respectively.
Rate lock — the effect of relatively high mortgage rates dissuading current homeowners from selling — is contributing to a lower flow of new listings across price tiers. March saw record-low new listings for this time of year, down 22% from last year. But rate lock is having the biggest impact on entry-level buyers in expensive West Coast markets. 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.
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. 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. Super-low rates had cranked up demand for more-expensive houses. But after mortgage rates peaked at 7% last fall, the share sold above list price for all three tiers converged; now they’re tracking together.
| Metropolitan Area* |
Bottom Tier Zillow Home Value Index (ZHVI) Change, Year over Year (YoY) |
Top Tier ZHVI Change, YoY |
Bottom Tier ZHVI Change Since Pre- Pandemic |
Top Tier ZHVI Change Since Pre- Pandemic |
Bottom Tier Inventory Change, YoY |
Top Tier Inventory Change, YoY |
| United States | 8Â % | -1Â % | 48Â % | 33Â % | 1Â % | 13Â % |
| New York, NY | 5Â % | 0Â % | 34Â % | 19Â % | -24Â % | -9Â % |
| Los Angeles, CA | 0Â % | -6Â % | 35Â % | 28Â % | -18Â % | 2Â % |
| Chicago, IL | 6Â % | 0Â % | 40Â % | 19Â % | -19Â % | -13Â % |
| Dallas, TX | 2Â % | -1Â % | 44Â % | 40Â % | 3Â % | 15Â % |
| Houston, TX | 4Â % | 2Â % | 41Â % | 33Â % | 12Â % | 28Â % |
| Washington, DC | 3Â % | -2Â % | 26Â % | 22Â % | -32Â % | -3Â % |
| Philadelphia, PA | 8Â % | 4Â % | 43Â % | 31Â % | -7Â % | -12Â % |
| Miami, FL | 16Â % | 6Â % | 64Â % | 54Â % | 18Â % | 48Â % |
| Atlanta, GA | 6Â % | 1Â % | 64Â % | 39Â % | -1Â % | 9Â % |
| Boston, MA | 4Â % | -1Â % | 34Â % | 24Â % | -32Â % | 4Â % |
| Phoenix, AZ | -2Â % | -3Â % | 46Â % | 40Â % | 1Â % | 55Â % |
| San Francisco, CA | -5Â % | -14Â % | 26Â % | 16Â % | -37Â % | 2Â % |
| Riverside, CA | 1Â % | -4Â % | 48Â % | 34Â % | 0Â % | 15Â % |
| Detroit, MI | 5Â % | 1Â % | 54Â % | 27Â % | 9Â % | -2Â % |
| Seattle, WA | -3Â % | -11Â % | 35Â % | 32Â % | -32Â % | 6Â % |
| Minneapolis, MN | 1Â % | -1Â % | 26Â % | 23Â % | -22Â % | 8Â % |
| San Diego, CA | 1Â % | -6Â % | 41Â % | 43Â % | -38Â % | -1Â % |
| Tampa, FL | 8Â % | 2Â % | 69Â % | 51Â % | 26Â % | 59Â % |
| Denver, CO | -1Â % | -5Â % | 29Â % | 25Â % | -4Â % | 47Â % |
| Baltimore, MD | 8Â % | 2Â % | 35Â % | 25Â % | -7Â % | -12Â % |
| St. Louis, MO | 8Â % | 2Â % | 45Â % | 27Â % | 2Â % | -1Â % |
| Orlando, FL | 8Â % | 3Â % | 53Â % | 43Â % | 12Â % | 41Â % |
| Charlotte, NC | 7Â % | 1Â % | 65Â % | 45Â % | 30Â % | 29Â % |
| San Antonio, TX | 5Â % | 1Â % | 43Â % | 37Â % | 42Â % | 63Â % |
| Portland, OR | -1Â % | -4Â % | 30Â % | 25Â % | -32Â % | 11Â % |
| Sacramento, CA | -3Â % | -7Â % | 32Â % | 24Â % | -36Â % | 2Â % |
| Pittsburgh, PA | 0Â % | 0Â % | 45Â % | 21Â % | -6Â % | 9Â % |
| Cincinnati, OH | 9Â % | 3Â % | 52Â % | 32Â % | -17Â % | 3Â % |
| Austin, TX | -6Â % | -8Â % | 48Â % | 45Â % | 30Â % | 95Â % |
| Las Vegas, NV | 0Â % | -5Â % | 34Â % | 27Â % | 9Â % | 38Â % |
| Kansas City, MO | 7Â % | 2Â % | 51Â % | 31Â % | 5Â % | 12Â % |
| Columbus, OH | 8Â % | 3Â % | 54Â % | 33Â % | -10Â % | 16Â % |
| Indianapolis, IN | 6Â % | 1Â % | 57Â % | 37Â % | 8Â % | 32Â % |
| Cleveland, OH | 6Â % | 4Â % | 47Â % | 30Â % | -1Â % | 2Â % |
| San Jose, CA | -1Â % | -11Â % | 31Â % | 24Â % | -54Â % | 16Â % |
| Nashville, TN | 6Â % | -1Â % | 55Â % | 48Â % | 25Â % | 67Â % |
| Virginia Beach, VA | 8Â % | 3Â % | 40Â % | 29Â % | -16Â % | -9Â % |
| Providence, RI | 6Â % | 2Â % | 42Â % | 35Â % | -34Â % | -13Â % |
| Jacksonville, FL | 7Â % | 2Â % | 61Â % | 51Â % | 49Â % | 63Â % |
| Milwaukee, WI | 8Â % | 3Â % | 39Â % | 21Â % | -32Â % | -21Â % |
| Oklahoma City, OK | 10Â % | 4Â % | 56Â % | 31Â % | -9Â % | 77Â % |
| Raleigh, NC | 4Â % | 0Â % | 54Â % | 43Â % | 2Â % | 66Â % |
| Memphis, TN | 8Â % | 2Â % | 62Â % | 35Â % | 7Â % | 36Â % |
| Richmond, VA | 21Â % | -3Â % | 67Â % | 21Â % | -12Â % | -8Â % |
| Louisville, KY | 10Â % | 2Â % | 47Â % | 27Â % | -6Â % | 2Â % |
| New Orleans, LA | 11Â % | -1Â % | 34Â % | 17Â % | 49Â % | 48Â % |
| Salt Lake City, UT | -2Â % | -5Â % | 43Â % | 36Â % | 6Â % | 66Â % |
| Hartford, CT | 9Â % | 5Â % | 43Â % | 31Â % | -32Â % | -9Â % |
| Buffalo, NY | 4Â % | 2Â % | 41Â % | 28Â % | -1Â % | -2Â % |
| *Table ordered by market size | ||||||
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