Home values are rising the fastest among entry-level homes in more than half of the largest U.S. housing markets, including Phoenix, according to first quarter Zillow Real Estate Market Reports.
Rising home values in this segment of the market can be attributed to a lack of supply, with 10 percent fewer homes for sale this year compared to last.
In metro Phoenix, the Zillow Home Valley Index for the first quarter is $219,200, compared to $186,200 for the nation’s largest cities.
The bottom tier price increase over the past year was 11.2 percent and the inventory of homes was down 28.5 percent. That is for homes in the bottom third of the market.
The findings signal difficult times ahead for first-time homebuyers looking to enter the market.
“It’s going to be a tough home-buying market this spring, especially for first-time buyers or even people looking to move up into a slightly more expensive home,” said Zillow Chief Economist Svenja Gudell. “In order to stand out in a competitive market, buyers should get pre-approved for a loan, find an agent who has experience with bidding wars, and consider coming in at the asking price, so the seller knows they’re serious.”
The median value of entry-level homes rose the most over the past year in Denver, up 20 percent, followed by Portland and Dallas. There are 13 percent fewer entry-level homes available in Denver than there were a year ago.
The number of entry-level homes declined the most in Portland. There are 40 percent fewer entry-level homes available in Portland than there were a year ago.
In Phoenix, middle-tier prices are up 8.4 percent and inventory declined 11.6 percent.
Prices are up 4.2 percent in Phoenix’s top tier of homes and inventory dipped 5.3 percent.
In all of the largest U.S. housing markets, more than a third of the homes available for sale are in the most expensive segment — in the top third of the overall housing stock in the market. In nine markets, top-tier homes make up more than half of the inventory.
The most expensive homes on the market are more likely to have a price cut, a signal that there’s less demand for top-tier homes. The share of top-tier listings with a price cut has increased 1.6 percentage points over the past year.
