Owners of starter homes across the country are gaining equity faster than other homeowners because demand for entry-level homes continues to grow faster than supply, Zillow reported Friday.
The phenomenon – which has become more pronounced over the past few years — underscores the power of home ownership to build wealth, particularly among the middle class, the company said.
Zillow® divided the U.S. housing stock into equal thirds based on value and determined the median value of the most and least valuable homes. Over the past year, homes in the most affordable segment of the market, which are often sought after by first-time buyers, gained 8.5% in value, compared to a 3.6% gain for the most expensive homes. Over the past five years, the difference is even more noticeable — people who own starter homes have seen their equity grow by 44.4%, while owners of top-tier homes have gained 26.6%.
“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. “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.”
Strong home value appreciation among more affordable homes is beneficial for people who own those homes, but also makes it difficult for buyers trying to enter the market. Inventory among the most affordable homes is extremely limited, making for a highly competitive market going into home shopping season — there are nearly 18% fewer entry-level homes available now than a year ago.
Among the largest U.S. housing markets, owners of the cheapest homes in Tampa, Florida are seeing the greatest gains in home equity. Over the past year, these homes have gained 20.4% in value. Las Vegas homeowners are close behind. The most affordable homes there have appreciated 19.9% from last year.
San Francisco, Seattle and San Jose, California are the only large markets where the most expensive homes are gaining value faster than starter homes.
| Metropolitan Area | Bottom Tier ZHVI | 1-Year Change – Bottom Tier | 5-Year Change – Bottom Tier | Top Tier ZHVI | 1-Year Change – Top Tier | 5-Year Change – Top Tier |
| United States | $120,100 | 8.5% | 44.4% | $363,000 | 3.6% | 26.6% |
| New York, NY | $260,200 | 8.5% | 24.1% | $790,600 | 5.7% | 29.2% |
| Los Angeles-Long Beach-Anaheim, CA | $436,700 | 9.0% | 66.2% | $1,062,000 | 7.8% | 44.7% |
| Chicago, IL | $122,100 | 5.0% | 31.6% | $373,400 | 1.3% | 19.6% |
| Dallas-Fort Worth, TX | $132,100 | 10.5% | 78.8% | $391,100 | 5.4% | 46.5% |
| Philadelphia, PA | $117,800 | 5.2% | 16.7% | $388,900 | 3.0% | 16.1% |
| Houston, TX | $125,300 | 12.7% | 71.4% | $331,200 | 2.6% | 28.3% |
| Washington, DC | $238,700 | 3.1% | 34.1% | $666,600 | -0.1% | 13.9% |
| Miami-Fort Lauderdale, FL | $138,100 | 10.1% | 102.2% | $463,000 | 2.1% | 39.2% |
| Atlanta, GA | $107,300 | 12.8% | 77.9% | $366,500 | 4.0% | 41.1% |
| Boston, MA | $283,400 | 8.5% | 41.5% | $732,600 | 5.2% | 33.9% |
| San Francisco, CA | $530,900 | 9.5% | 103.3% | $1,559,400 | 11.6% | 70.4% |
| Detroit, MI | $53,700 | 17.2% | 46.3% | $286,600 | 4.0% | 41.3% |
| Riverside, CA | $226,900 | 9.7% | 87.2% | $498,500 | 6.9% | 46.8% |
| Phoenix, AZ | $166,900 | 9.8% | 85.4% | $410,200 | 4.7% | 30.5% |
| Seattle, WA | $298,300 | 12.1% | 79.7% | $832,900 | 13.5% | 67.9% |
| Minneapolis-St Paul, MN | $171,700 | 6.2% | 48.0% | $391,800 | 3.0% | 26.4% |
| San Diego, CA | $416,300 | 7.7% | 64.6% | $876,700 | 6.9% | 37.8% |
| St. Louis, MO | $77,400 | 6.5% | 20.0% | $280,400 | -1.8% | 17.4% |
| Tampa, FL | $110,500 | 20.4% | 95.2% | $337,400 | 1.5% | 43.1% |
| Baltimore, MD | $138,700 | 3.8% | 13.9% | $452,100 | -0.3% | 10.8% |
| Denver, CO | $267,600 | 9.5% | 92.8% | $577,600 | 5.7% | 45.9% |
| Pittsburgh, PA | $75,400 | 9.9% | 27.4% | $249,600 | 2.1% | 21.9% |
| Portland, OR | $274,300 | 8.3% | 80.3% | $559,600 | 2.6% | 50.9% |
| Charlotte, NC | $107,900 | 16.9% | 40.1% | $347,900 | 5.5% | 30.6% |
| Sacramento, CA | $270,400 | 9.8% | 101.0% | $565,200 | 5.6% | 44.1% |
| San Antonio, TX | $103,500 | 18.4% | 50.4% | $296,600 | 5.7% | 27.0% |
| Orlando, FL | $126,300 | 12.6% | 86.3% | $334,400 | 0.9% | 35.5% |
| Cincinnati, OH | $95,400 | 8.8% | 28.1% | $276,100 | 3.4% | 20.7% |
| Cleveland, OH | $70,400 | 8.0% | 19.3% | $250,100 | 3.4% | 18.4% |
| Las Vegas, NV | $151,700 | 19.9% | 104.4% | $368,300 | 9.7% | 59.6% |
| Columbus, OH | $94,900 | 12.3% | 40.2% | $312,600 | 6.5% | 31.8% |
| San Jose, CA | $751,000 | 18.0% | 87.6% | $2,096,700 | 18.9% | 73.8% |
| Austin, TX | $189,000 | 8.1% | 57.9% | $479,900 | 5.5% | 37.8% |
| Virginia Beach, VA | $142,200 | 2.5% | 9.9% | $359,400 | 0.5% | 9.0% |
| Nashville, TN | $147,700 | 14.3% | 58.5% | $407,800 | 6.7% | 41.2% |
