Just a few months ago, one and two bedroom starter homes topped the price per square foot ratings as investors and first-time home buyer scrambled to buy them, bidding up prices in the process. Prices rose quickly, especially in markets where no new starter homes had been built in years.
Virtually overnight the picture has changed. Now larger homes are selling faster and appreciating at rates faster than starter homes, a solid sign that move up buyers are back in the market and taking advantage of low interest rates and equity increases that have made it possible to sell and buy larger homes.
“Higher-end properties are taking up a bigger share of a smaller home sales pie, boosting the median home price nationwide higher even as home price appreciation slows to single digits in many of last year’s red-hot local housing markets,” said Daren Blomquist, vice president at RealtyTrac, in a news release last September reporting August sales. “On the other hand, markets where large institutional investors and other buyers have not picked clean lower-priced inventory are continuing to see strong, double-digit increases in median home prices.”
RealtyTrac said the share of sales in August in the $200,000-and-below price range was down 9 percent from a year ago, while the share of sales in the above-$200,000 price range increased 10 percent from a year ago. Breaking down the above-$200,000 price range further, the share of sales in the $500,000-to-$1 million price range increased 18 percent from a year ago while the share of sales in the over-$1 million price range increased 38 percent from a year ago. Overall the share of sales above $500,000 increased 23 percent from a year ago.
Now mortgage technology company FNC reports that property appreciation rates for single-family residential home sales are generally much higher for larger homes and older homes. FNC said a profile of long-term trends in how different types of properties have appreciated over the years shows that larger homes have generally risen in value faster than smaller homes both before and after the last boom-bust housing cycle. The gap persisted, although narrowed quite a bit, during the worst of the housing recession.
The FNC analysis also found that more sales are coming from homes that have been held for ten years or more—a sign of move up buyer activity. “As the market continues to gain traction through the post-recession recovery, we are seeing significant declines in the turnovers of homes held for short periods. Year to date, nearly one in three residential home sales have come instead from homes that have been held for at least a decade or longer—signs of increased participation by trade-up buyers,” said FNC Director of Research Yanling Mayer.