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Starter homes gaining equity faster than luxury sector: Zillow

02/17/2018

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Owners of starter homes are gaining more equity than owners of luxury homes thanks to the intense demand for affordable properties, says a new Zillow report.

Over the past year, starter homes gained 8.5 percent in value while luxury homes only gained 3.6 percent in value. Over the past five years, owners of starter homes have experienced a 44.4 percent growth in equity — 17.8 percentage points more than owners of luxury homes (26.6 percent).

“When the housing market crashed, owners of the least valuable homes were especially hard hit, and lost more home value than homeowners at the upper end of the market,” said Zillow senior economist Aaron Terrazas in a statement. 

“Since then, though, demand for less expensive, entry-level homes has built steadily, causing prices to grow rapidly. As a result, these homeowners have been able to build wealth at a faster pace than owners of more expensive homes.”

Although increases in home price appreciation are obviously great for homeowners, they’re making it difficult for first-time buyers to enter the market, especially when the inventory for starter homes has decreased 18 percent year-over-year, according to the report.

On the metro level, owners of starter homes in Tampa, Florida experienced the greatest increases in home equity with a 20.4 percent increase. Homeowners in Las Vegas (19.9 percent), San Antonio (18.4 percent), San Jose (18.0) and Detroit (17.2) have also fared exceptionally well, with increases nearing 20 percent.

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There are the only a few large markets where the most expensive homes are gaining value faster than starter homes: San Francisco (11.6 percent vs. 9.5 percent), Seattle (13.5 percent vs. 12.1 percent) and San Jose (18.9 percent vs 18.0 percent).

Source: Zillow

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Email Marian McPherson.

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