Here is some data on prices on different ends of the housing market:

Indeed, a Realtor.com report found that while starter homes — which it defines as all two-bedroom listings — seem unaffected by the current correction in the housing market, luxury homes have been feeling the full effects…

The price trajectory for luxury homes — which Realtor.com defines as the most expensive 10% of homes in any given market — however, went the opposite way.

Their prices “skyrocketed as the stock market surged and buyers sought more living space” during the pandemic: in the middle of 2021, there was a  40% year-over-year price increase for luxury homes but by the end of the year, the luxury market receded as recession fears increased. And in 2022, luxury homes have seen modest-to-stagnant price growth, around 2.5%, ending the year close to flat…

“If you think of luxury home purchases as discretionary, starter home purchases are almost the opposite,” Hale said in the report. “It’s more about timing and strategy.”

If starter homes are now more expensive due to demand and limited supply, does that make them more attractive to communities and developers to consider approving and building? One concern some communities have is that cheaper homes might devalue other homes in the community and/or bring different residents to a community. When they envision more affordable housing, they may have particular sets of people in mind.

This also reminds me of an earlier post about the number of larger homes that older Americans might bequeath to younger adults. Could an older McMansion be the starter home of the future?