"Bottoms Up"

As a follow-up to our write-up last month, we wanted to revisit single family absorptions by price quartile. As a quick recap, the housing market this cycle had been led by the top two price quartiles with the third quartile showing some strength throughout this year’s spring selling season. The bottom quartile had been noticeably left behind. Examining our data partner Altos Research’s robust single family housing data, we began to see absorptions within the bottom quartile pick up meaningfully on a Y/Y basis early in the summer, outpacing the other three price quartiles. This trend continued throughout July and August.

In the chart below, we can see demand within the bottom quartile continued to grow at a faster rate in September than the other three quartiles. As a matter of fact, the other three price quartiles experienced a slowing in demand, in line with their typical seasonal trends. The bottom quartile is initially bucking that trend reflecting healthy demand, at least relative to available supply, potentially suggesting a resuscitation of the first time homebuyer along with lower income buyers.

Now again, a few months isn’t necessarily an enduring trend but we find it encouraging

Along these lines, we have had some inquiries about price movement in the bottom quartile. As we would expect, price movements within the bottom quartile continue to be fairly muted relative to the top two price quartiles given the lower beta nature of lower priced homes. In an environment where incomes aren’t rising meaningfully and lending standards remain fairly strict there isn’t enough firepower to get lower priced homes moving up in a hurry. Regardless, we find the current data encouraging and supportive of a healthy housing market. 

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