Buckle Up, Buyers: Competition is Most Fierce for Entry-Level Homes

SEATTLE, Oct. 20, 2020 /PRNewswire/ -- Only the weather is cooling down this fall, as the speed of home sales continues to accelerate, especially for shoppers seeking entry-level homes.

New Zillow® research shows many homes sold just days after hitting the market in September, regardless of price, with the typical¹ U.S. home going under contract in just over two weeks. This is one day quicker than August, about 44% faster than this time last year, and significantly faster than even a typical spring selling season. May is when the market is usually the hottest, but homes this September moved six days faster than they did in May 2019.

And while speedier sales were common across all price ranges, lower priced homes typically sold the fastest. Entry-level homes priced between $186,000 and $260,000 were snatched up most quickly, going under contract at 14 days, six days faster than the same time last year. Mid-market homes (between $260,001 and $344,000) were not far behind that pace, selling in 16 days, and the most affordable ($185,999 or less) typically took 18 days to sell this September, in part because that group tends to include more fixer-uppers.

Quicker-than-normal home sales for entry-level and mid-market homes shows that many buyers may be re-evaluating their home's functionality as they work, live, and play at home. For renters, working from home and record-low mortgage rates have opened up more homeownership opportunities for first-time buyers wanting to take the leap into the housing market and secure a starter home. That means buyers looking for more desirable features, such as more space or rooms, have plenty of competition. Amid incredibly low inventory levels, many eager home shoppers make an offer in mere days, and 12% of buyers are even willing to purchase a home sight-unseen. Tools like 3D Home tours, which are becoming more and more popular, help buyers make those decisions more quickly.

The most expensive homes ($488,000 and up) are staying on the market the longest, going under agreement in 33 days, one factor driving up median list prices as expensive homes stay on the market longer than less expensive ones. Homes at the top of the market commonly take longer to sell than less expensive homes, with fewer buyers in that price range. But, despite lingering economic and unemployment uncertainty, homes at the top of the market are still selling two weeks quicker than the same time last year.

"Normally, the housing market begins to slow down around this time of year as the weather cools and buyer activity fades, but it's 2020, and nothing is normal this year," said Zillow senior economist Chris Glynn. "Instead of slowing down, we're seeing the housing market continue to speed up as Autumn continues. The buying season we're seeing this fall more closely resembles peak market activity we'd see in the spring in a typical year. It remains to be seen whether the 'traditional' buying season continues to be pushed back because of Covid-19 and activity will taper off in coming months, or whether historically low inventory and continued strong demand mean homes will continue to sell incredibly quickly through the rest of the year."

The days-on-market spread between the most and least expensive homes is tightening, signaling broad demand. During a normal year, that spread is typically tightest in May and widens by about 10 days by September. However, in yet another example of unusual seasonal trends, it only took five more days in September to sell the most-expensive homes than it did in May, about half of what is usually expected for this time of year.

In many metropolitan areas, the spread between days on market for the most and least expensive homes is even tighter. There was essentially no difference in days on market between the top and bottom price tiers in the Salt Lake City, Seattle, Pittsburgh, and San Francisco areas, where the bottom of the market sold just two days faster than the top.

Among the 50 largest markets, homes sold fastest in Columbus, Cincinnati, Kansas City and Indianapolis -- all going under contract in five days or less. The metros seeing most days on market are Nashville (36 days), New York (28), Virginia Beach (28), and San Antonio (27). Buffalo is the only market seeing the opposite trend, where the most expensive homes sold 34 days faster than the most affordable.

*Data as of September 2020

**Negative means homes are selling quicker than a year prior

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¹ Median or "typical" may slightly differ from productionalized monthly series due to minor differences in smoothing and weighting methodology over time and tiers.

SOURCE Zillow

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