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Most people haven’t been as lucky.
Some 900 miles away in Virginia Beach, Talia Phillips and her husband started looking for a trade-up home last summer, after their third child was born. Their daughters, ages 7 and 11, had their own rooms in the family’s three-bedroom house, while the couple shared the third with the baby.
A year later, they were optimistic about the equity they’d amassed in their starter home. But when they learned that their mortgage would jump from $1,300 a month to about $3,000 if they bought a new house, they called off their search. “I’m just a little frustrated, and hope that, you know, in a couple years, interest rates will go down,” Ms. Phillips said.
Those With Less Pay More
With buyers and sellers in higher price tiers effectively paralyzed, the weight of the housing market is pressing down hardest on those with the least to spend.
“The trade-up buyer has just disappeared,” said Sam Khater, chief economist at Freddie Mac, explaining that homeowners who are unable to upgrade are instead going down in the price continuum. “The lack of supply, it’s not just that it’s causing prices to go up, but it’s causing prices in the bottom half of the price distribution to go up even more.”
Prices in the lowest tranche of the housing economy are growing at a faster rate in than any other category. Over the past 20 years, the price for entry-level homes — defined as homes that cost 75 percent or less than the median in a given market — has nearly tripled since 2004, according to CoreLogic, a property information firm. (A starter home fitting this definition in Manhattan is as high as $863,000, while one in Cleveland is no more than $142,000, according to Alex Lacter, a spokesman for Zillow.)
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