If you have been following the housing market lately, it has been nothing short of a rollercoaster ride. For much of 2020 and 2021, home prices reported large increases across the board, but record low mortgage rates made borrowing relatively affordable. Then as we entered the second half of 2022, price growth started cooling while mortgage rates climbed rapidly.

While figures like median home sale prices help paint an overall picture of the housing market, it is important to know that different types of homes are affected in different ways. Prices for starter homes, which are smaller, more affordable dwellings geared toward first-time homebuyers, have been on an upward trajectory, rising faster than other segments of the real estate market. According to Realtor.com, starter homes – defined as all two-bedroom listings – finished 2022 with a 15% year-over-year price increases.

Meanwhile, house price growth for luxury properties – the top 10% of the market – has been rather sluggish, ending 2022 at around 2.5%. Because luxury goods are seen as discretionary, they are often the first to get slashed from budgets in times of economic uncertainty. In addition, because high-end homes are frequently purchased as investment properties, the prospect of falling home values and rent in 2023 is putting a damper on sales for this category. 

Realtor.com has recently analyzed markets where luxury properties are losing value and where starter homes prices are growing fastest. Following is some of their findings:

Where luxury home prices are stalling

Salt Lake City, UT

Luxury home price in December 2022: $1.15 million-plus

Change from 3-year price peak: -28.1%

Sacramento, CA

Luxury home price in December 2022: $1.35 million-plus

Change from 3-year price peak: -18.2%

Houston, TX

Luxury home price in December 2022: $799,000-plus

Change from 3-year price peak: -18.1%

Where starter homes are rising fastest

Nashville, TN

Starter-home price in December 2022: $349,900

Year-over-year price change: +10.8%

3-year price change: +43.7%

San Diego, CA

Starter-home price in December 2022: $678,470

Year-over-year price change: +13.5%

3-year price change: +29.9%

Houston, TX

Starter-home price in December 2022: $255,200

Year-over-year price change: +4.5%

3-year price change: +25.3%

To see the complete report, click here.

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