The housing market is in the dumps, except in one category

First-time buyers returned to the market in droves in June

By Mark Huffman of ConsumerAffairs

July 29, 2025

• Starter home sales jumped 3.9% year over year in June, reaching the highest level in two years.

• The surge is fueled by growing inventory and interest from first-time buyers priced out of higher tiers.

• In contrast, sales in mid, high, and luxury home segments declined, highlighting starter homes as a rare bright spot.

Home sales have been declining for months, leading to one of the softest spring housing markets in recent memory. However, a new report from real estate brokerage Redfin points to a hopeful exception: Sales of starter homes rose 3.9% year over year in June, marking the strongest performance for the category in two years.

This uptick stands out in a generally sluggish housing market where sales of homes in higher price tiers declined as prices inch toward record highs.

Starter homes had a median sale price of $260,000 in June an all-time high yet a modest 3.1% year-over-year price growth suggests price acceleration may be easing.

In a market where it’s difficult for most Americans to afford a dream home, many are turning toward starter homes, said Redfin Senior Economist Sheharyar Bokhari.

Theres still an affordability crunch

While entry-level buyers flocked to starter homes, the rest of the housing market cooled:

• Mid-priced homes (35th-65th percentile) saw a 0.9% annual drop in sales and a 0.7% drop in pending sales.

• High-priced homes (65th-95th percentile) fared worse, with sales down 3.6% and pending sales falling 2.7%.

• Luxury properties (top 5% of the market) suffered a 6.7% plunge in sales and a 5% drop in pending sales.

Despite these declines, prices in these segments continued to rise, albeit modestly. Mid-tier homes increased 2.1% to $370,784, high-tier homes rose 2.7% to $577,117, and luxury home prices climbed 4% to $1.29 million.

Growing inventory

One of the key factors bolstering the starter-home market is inventory. Active listings for starter homes jumped 19% year over year in June, reaching the highest June level since 2017outpacing growth in all other price categories. With more options available, buyers are facing less competition.

The buyers who are out there are no longer in competition with 10 other offers or all-cash buyers, said Kathy Scott, a Redfin Premier agent in Phoenix, where starter home listings surged more than 40%.

That growing inventory also gives buyers more leverage and time. Many are even waiting for prices to potentially fall further, Scott said, though she cautioned that long-term ownership could offset short-term market fluctuations through equity gains.

The $260,000 median price for a starter home, while lower than mid and high-tier homes, still puts homeownership out of reach for many. Redfin estimates that a household needs an annual income of $112,131 to afford the median home in the U.S., far above the $86,258 that the typical household earns.

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