Kentucky’s housing market experienced remarkable changes from 2018 through 2023, especially for budget-conscious households earning under $250,000 per year. These moderate-income buyers – essentially the bulk of Kentucky’s middle class – navigated a period of rising home prices, shifting mortgage rates, and tight supply. What types of properties they bought, whether they upsized or downsized, how first-time buyers differed from repeat buyers, and how trends varied in Louisville, Lexington, and rural Kentucky help to shape the state’s real estate market.

Market Overview: Rising Prices Amid Record Sales

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Record-Breaking Sales Activity

Kentucky’s housing market was robust in 2018–2021, with home sales hitting record highs and prices climbing steadily. In 2019, Kentucky’s annual home sales topped 50,000 transactions for the first time in history, reaching 50,891 closed sales. This broke the previous record (49,574 sales in 2017) and reflected booming demand statewide.

Home sales surged even higher in 2020 and 2021 despite the pandemic, fueled by rock-bottom mortgage rates and pent-up demand. By 2021, annual home sales in Kentucky had increased to roughly 57,000 homes sold statewide, about 3% more than 2020’s tally (approximately 55,500 sales). This streak of record-breaking activity indicated that buyers, including those on budgets under $250K income, were eagerly purchasing homes when conditions were favorable.

Dramatic Price Increases

Home prices rose markedly during this period. The median home price in Kentucky jumped from around $163,000 in 2018 to about $172,000 in 2019 – a ~5% annual increase. Prices accelerated further during the pandemic housing boom: by March 2021 the median sale price was about $199,000, up 11% year-over-year from $179,000 in March 2020.

Statewide, 2020 saw roughly a 10–11% rise in home values, and 2021 saw an even larger jump (Kentucky’s house price index rose ~14% in 2021 alone). By the end of 2022, the median price for a Kentucky home hovered around $240,000, an all-time high. Over the full 2018–2023 span, Kentucky’s median home values rose roughly 50–60% – a dramatic increase that outpaced income growth and squeezed affordability.

The Interest Rate Rollercoaster

Despite rapidly rising prices, low interest rates through 2021 kept monthly payments relatively manageable for many buyers. Mortgage rates hovered around 4–5% in 2018–2019, then plummeted. By late 2020 and into 2021, 30-year fixed rates averaged 3% or below, giving buyers in Kentucky extra purchasing power.

These ultra-low rates allowed budget-conscious households to afford higher-priced homes without raising their monthly costs too dramatically. Indeed, 2020 was a record-breaking year in Kentucky’s housing market: Realtors reported more homes sold in 2020 “than we have ever sold before in Northern Kentucky,” amid fierce competition and shrinking inventory.

The 2022-2023 Cooldown

By 2022–2023 the environment changed. The post-pandemic housing frenzy cooled as the Federal Reserve raised interest rates to combat inflation. Kentucky felt the impact in late 2022: 30-year mortgage rates doubled from around 3% in early 2022 to over 6% by year-end, with peaks near 6.8–7.0%. This rapid rise in rates caused a noticeable slowdown in sales.

In Central Kentucky, home sales in the second half of 2022 dropped sharply – December 2022 sales were down 37% year-over-year in the Bluegrass region (911 homes sold vs. 1,448 the prior December). Statewide, 2022’s total home sales fell about 12% from the 2021 peak, as higher financing costs priced some buyers out. Even so, demand still exceeded supply in most of Kentucky.

By 2023, conditions began to stabilize somewhat: inventory inched up and price growth moderated to single-digit percentages, but median prices remained high. Early 2024 reports indicated Kentucky’s market might be turning slightly more favorable for buyers, with new listings increasing and days-on-market lengthening.

First-Time vs. Repeat Buyers on a Budget

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Declining Share of First-Time Buyers

One major trend among sub-$250K income households was the declining share of first-time homebuyers during the later years of this period. Traditionally, first-time buyers (often younger and on tighter budgets) make up about 30–40% of the market. In Kentucky and nationwide, that share shrank significantly by 2022.

According to the National Association of Realtors (NAR), first-time buyers comprised only 26% of home purchasers in 2022, down from 34% in 2021. This was the lowest first-time buyer share since NAR began tracking, and nearly half the peak level (50% in 2010) when federal incentives boosted first-timers. The likely causes were worsening affordability and heavy competition: as home prices and interest rates rose, many younger or lower-income buyers struggled to save down payments or qualify for loans, and they were often outbid by repeat buyers with more cash or equity.

Advantages for Repeat Buyers

In Kentucky, repeat buyers (existing homeowners) in the under-$250K income bracket often had advantages like home equity and higher credit, allowing them to move despite rising costs. Many repeat buyers used proceeds from selling their prior home to afford a new one, whereas first-timers had to scrape together cash and face high prices.

By 2021, Kentucky REALTORS® were voicing concerns about housing affordability for entry-level buyers, even as the market “buzzed.” Rising prices were sidelining some would-be buyers, and the association was advocating to “reduce the cost of buying a home” for Kentuckians.

Changing Buyer Demographics

Buyer demographics changed over this period. The typical homebuyer has been getting older as affordability challenges mount. National data show the median age of first-time buyers rose to 36 years old in 2022 – the highest on record. Repeat buyers’ median age also climbed (often into the 50s or 60s).

What this means in practice is that millennials – who were in their 20s and 30s during 2018–2023 – gradually became the dominant buying group, but they often delayed home purchases longer than previous generations. In Kentucky’s budget-conscious segment, many first-time buyers in recent years were older millennials in their 30s who had saved up during the 2010s and jumped in during the pandemic’s low-rate window.

Meanwhile, younger millennials and Gen Z (in their 20s) found it tough to break into homeownership until 2023, when the market calmed slightly. Repeat buyers tended to be Gen X or baby boomers, often in their 40s, 50s, or 60s, who either upgraded to a larger home or downsized after children moved out.

Different Financial Approaches

The first-time vs. repeat dynamic also played out in terms of financial approach. First-time buyers in Kentucky commonly utilized FHA loans, state down payment assistance programs, or USDA rural housing loans to afford a purchase.

Kentucky Housing Corporation (KHC), for example, offers special mortgage programs for first-time and moderate-income buyers statewide, including down payment assistance and mortgage credit certificates (tax credits). These programs were a crucial lifeline for new buyers under the $250K income mark, helping bridge the gap as prices climbed.

Repeat buyers more often used conventional financing, sometimes putting down larger down payments (augmented by equity from a prior home sale). Additionally, repeat buyers could “buy first, then sell”, using bridge loans or contingent offers, whereas first-timers had no such leverage.

During the 2020–2022 frenzy, some sellers would favor offers from existing homeowners who had flexible finances over those from first-time buyers with minimal cash, further tilting the market.

Signs of First-Time Buyer Recovery

By 2023, first-time buyers were beginning to make a modest comeback as competition cooled. NAR’s latest data suggests the first-time buyer share in early 2023 ticked back up as investor activity waned and sellers received fewer bids.

In Kentucky, any improvement in inventory or dip in prices tends to open the door for more first-timers, given the pent-up demand. Many younger families who sat out the bidding wars of 2021 were eager to buy by 2023 if they could find an affordable home.

Still, repeat buyers with under $250K incomes remained active too – especially those relocating for jobs or retiring to Kentucky’s relatively affordable market from higher-cost states.

Upsizing, Downsizing, and Staying Put

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The Upsizing Trend

When it comes to housing choices, Kentucky’s budget-conscious buyers showed a mix of behaviors from 2018 to 2023 – some upsizing to larger homes, others downsizing or rightsizing, and many opting to stay put due to market conditions.

Upsizing (buying larger or more expensive homes) was common for families and repeat buyers in this income range through about 2021. With mortgage rates so low and equity rising, a lot of middle-income homeowners took the opportunity to sell and trade up to a bigger house or a preferred neighborhood.

For example, a family in Louisville with a household income of $120K who owned a starter home could sell it for a handsome profit in 2021 and upgrade to a more spacious suburban house – often with only a modest increase in monthly payment thanks to 3% interest rates.

The fierce competition in the market meant upsizers had to act quickly: buyers often had to decide within hours and bid aggressively to win a house. Successful move-up buyers often were those who could waive contingencies or pay above listing price. This period saw many such buyers stretching their budgets (within that under-$250K income constraint) to afford the home they wanted.

Downsizing Challenges

On the other hand, downsizing buyers – often empty nesters or retirees – also made moves. Kentucky has a significant population of older homeowners who don’t necessarily have lavish incomes (many retirees fall under $250K/year) but have substantial home equity after years of ownership.

From 2018–2021, some took advantage of the seller’s market to cash out of large family homes and downsize to something more manageable. Downsizers might purchase a smaller single-story house, a condo, or even move to a quieter rural area.

By selling in a high market, they could often pocket cash and buy a less expensive home outright or with a small mortgage. For example, a 60-year-old couple in Lexington might sell their longtime home to a bidding war, then buy a smaller townhouse in the Bluegrass region, thereby reducing housing costs.

This trend was evident anecdotally, though downsizers had to be careful – finding a suitable smaller home was challenging due to limited inventory of condos and single-floor plans. Some ended up waiting because competition for smaller, lower-priced homes was as intense as for larger ones (first-time buyers and investors were targeting the same homes the downsizers wanted).

The “Stay Put” Phenomenon

Indeed, staying put became a notable trend by 2022–2023. As interest rates rose, many existing homeowners with low mortgage rates decided not to move at all, since buying a new home would mean taking on a much higher rate. This so-called “lock-in effect” was strong nationally and in Kentucky.

Owners with 3% loans were reluctant to trade that for a 7% loan on a new house. Thus, the normal flow of upsizing and downsizing slowed. Homeowners on a budget often chose to renovate or expand their current homes rather than move, since selling and buying in 2022 could mean both a pricey home and a costly mortgage.

This contributed to the low inventory: fewer people listed their homes, exacerbating the shortage for first-time buyers. By late 2022, new listings in Kentucky had fallen significantly – in Central Kentucky, new listings were the lowest on record in 2022, especially after interest rates spiked in mid-year.

Realtors noted that once rates jumped, both buyers and sellers “were caught off guard” and pulled back. As a result, many households simply “stayed put” in 2022–2023, unless a life event absolutely necessitated a move.

Second Homes and Investments

Within the under-$250K income group, buying second homes or investment rentals is less common than among high earners, but it did occur. The pandemic sparked some interest in vacation homes even among middle-class buyers nationwide, as remote work allowed more leisure travel and second-home markets boomed in 2020–21.

Kentucky isn’t a traditional vacation-home hotbed, but areas like Lake Cumberland, Lake Barkley, and Red River Gorge saw increased attention. A subset of higher earners in our target group (say those making $150–250K) did purchase weekend lake cottages or cabins in 2020–21, taking advantage of low rates and looking for safe getaways. However, by 2022 that trend cooled off sharply as costs rose.

Similarly, investment property purchases by budget-conscious households were a factor: small-scale investors (like “your neighbor who owns a second home, not Wall Street”) were active in buying homes to rent out.

In 2021, investors bought a larger share of homes than usual – one analysis found 24% of single-family home sales nationwide in 2021 went to investors, up from ~16% in prior years. Kentucky’s affordable prices attracted some out-of-state investors, but also local landlords expanded portfolios.

This investor activity meant some budget-minded owner-occupants lost out on starter homes that became rentals instead. By late 2022, though, investor buying waned as interest rates and cooling rents made it less attractive.

Property Types: What Buyers Purchased

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The Dominance of Single-Family Homes

The vast majority of Kentucky homebuyers – especially those in the budget-conscious bracket – purchased single-family homes in 2018–2023. Kentucky is a state dominated by single-family housing, and detached houses remained the preferred property type.

According to NAR’s nationwide profile, typically around 82–85% of home purchases are detached single-family homes, and the pattern in Kentucky aligns with that. Buyers under $250K income often have families or plan to start families, making the traditional house with a yard very attractive.

Throughout the state, whether in Louisville’s suburbs or rural counties, owner-occupants gravitated toward stand-alone houses (usually 3-bedroom or 4-bedroom homes). This includes both newer construction in suburban subdivisions and older homes in established neighborhoods.

Alternative Property Options

However, other property types did play a role, particularly as prices rose and inventory stayed tight. In urban areas like Louisville and Lexington, townhomes and condos became an appealing alternative for some buyers.

These attached housing options are generally less common in Kentucky than in big metro areas, but they constitute a segment of the market. For example, downtown Louisville and Lexington both have condo developments (lofts, high-rises, and townhouse communities).

First-time buyers on a budget sometimes chose condos/townhomes because they could be more affordable than single-family houses in the same location. By 2022 and 2023, there were signs of increasing interest in condos: in early 2024, condo and townhouse sales in Kentucky were up 30% year-over-year, even as single-family home sales were down 10%.

This suggests that some buyers shifted to condos/townhomes, potentially due to affordability constraints (condos often have lower price points) or because new condos came on the market. For instance, if a single-family home in Lexington’s Fayette County was out of reach, a buyer might opt for a townhome in a slightly farther neighborhood or a condo unit that fit their budget.

Manufactured Homes and Rural Options

Another niche property type for budget-conscious buyers in Kentucky was the manufactured home or mobile home on land. Particularly in rural areas, some families bought manufactured homes (which are typically less expensive) either placed on a piece of land or in a land-lease community.

These homes offered an economical path to homeownership for lower-income households in our target group, albeit with trade-offs like potential difficulties in financing and faster depreciation. The USDA rural housing loan program, which allows 0% down payments in eligible rural areas, made it possible for some to buy homes in the countryside – including modular or manufactured homes – at a very low upfront cost.

While not a large portion of the urban markets, this is worth noting for rural Kentucky, where mobile homes remain part of the housing stock for under-$250K households.

Multi-Generational and Multi-Unit Living

A trend related to property type is multi-generational living. Nationally, an increasing number of buyers have been purchasing homes to accommodate multiple generations of family under one roof (parents, adult children, grandparents). In 2020–2021, about 15–20% of home purchases were multi-gen, a high in recent history.

In Kentucky, multi-gen purchases occurred when families pooled resources to afford a larger home. For example, a household earning $80K might combine with an elderly parent’s income to together buy a home with an in-law suite. This effectively increases budget and can be a strategy when homes are expensive relative to income.

Multi-gen setups blur the line between “upsizing” and “investment,” since the home is partly an investment in family care. The property type they seek is usually a single-family house with sufficient space or perhaps a duplex (one unit for each generation).

Duplexes and small multi-unit properties (2–4 unit buildings) were occasionally purchased by budget-conscious buyers, sometimes with the idea of living in one unit and renting the others for income. This owner-occupant investor hybrid can be savvy: for instance, a first-time buyer under $250K income might buy a duplex in Louisville’s Highlands, live in one half, and use the rent from the other half to help pay the mortgage.

Regional Differences: Louisville, Lexington, and Rural Kentucky

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Louisville Metro Area

As the largest city, Louisville experienced strong demand from 2018–2023. Home prices in Louisville appreciated significantly – roughly 79% growth over the decade leading up to 2024, which was among the higher increases in the nation.

By 2021, the median home price in Jefferson County (Louisville) was about $230,500. In 2022, Louisville’s median price kept climbing, reaching the mid-$250s (one report noted a $264,650 median in August 2022, up 12.6% from a year prior).

For budget-conscious buyers, Louisville presented challenges: inventory in popular price ranges was scarce, with less than one month’s supply of homes available in late 2020. Neighborhoods in the East End and South End saw bidding wars on mid-priced homes. First-time buyers in Louisville often had to look in outlying areas or consider townhomes.

The region did have some condo developments, which attracted downsizers and young professionals. By 2023, Louisville’s market started to cool slightly, but it remained a seller’s market with homes selling in just over a month on average. Louisville’s buyers under $250K income had to be particularly strategic, sometimes targeting the Indiana side of the metro (Southern Indiana) for slightly cheaper options, or considering older homes needing a bit of work.

Lexington and Central Kentucky

Lexington (Fayette County) and its surrounding Bluegrass region also saw robust growth. This area benefits from the University of Kentucky, government jobs, and horse industry wealth. The median price in the Lexington area hit $240,000 in 2022, up 9% from $220,000 in 2021.

Notably, the Bluegrass Realtors report for 2022 highlighted that this was a record high and that prices had increased year-over-year for 46 consecutive months through the end of 2022. Lexington’s housing supply was extremely tight; months of inventory often hovered around 1–2 months or less during 2020–2021.

In fact, the region’s active listings in 2022 were about 50% below 2019 levels on average, illustrating the crunch. Buyers in Lexington with moderate incomes frequently had to compromise on location or size – for example, choosing a smaller home in Lexington proper, or moving to neighboring counties (Scott, Jessamine, Madison, etc.) for more affordability.

Areas like Georgetown, KY or Nicholasville became hot spots for family buyers who work in Lexington but wanted a bit more house for the money. Central Kentucky also has many rural counties; interestingly, Lexington’s prosperity spilled over as rural properties gained popularity during the remote-work era.

Rural Kentucky’s Different Experience

Large swathes of Kentucky are rural or small-town in character – from the Appalachian eastern counties to the western Kentucky farm counties. Rural housing trends saw comparatively lower absolute prices and more gradual appreciation, but even rural markets tightened up by 2020–2022.

One metric: the median value of owner-occupied homes in Kentucky was $177,000 (2018–2022) on average, which reflects how rural areas (with lower home values) pull the overall median down below the metro-specific medians.

In rural communities, households under $250K income are the norm, and many homes are modest. During the 2018–2023 boom, even rural sellers found they could get good prices – there were reports of homes in small towns receiving multiple offers as urbanites expanded their search radius.

Rural Kentucky also heavily benefits from USDA loans (for areas under a certain population size), enabling 100% financing for qualified buyers. This helped many first-time buyers in places like Eastern Kentucky, where incomes are lower, to purchase homes with no down payment.

On the downside, rural areas often have older housing stock and fewer new homes being built, so the supply of quality housing can be limited. Some rural counties saw little to no construction in the last decade. This meant that buyers looking for modern or move-in-ready homes in rural Kentucky had slim pickings, pushing more of them to consider manufactured homes or to buy land and build if possible.

Overall, rural markets were less frenzied than Louisville or Lexington, but they were not immune to the inventory shortage and saw their own price increases. For instance, even in far-eastern Kentucky, anecdotal evidence suggests home prices in 2022 were up from a few years prior, and days-on-market shortened.

Conclusion

From 2018 to 2023, Kentucky’s housing landscape for households earning under $250,000 was marked by high demand, rising prices, and adaptive strategies by buyers. Owner-occupiers in this income range predominantly sought single-family homes, and many had to adjust by considering condos, townhouses, or more distant locales as the market heated up.

First-time buyers found the going toughest, with their share of purchases hitting record lows by 2022 amid affordability challenges. Repeat buyers often held the upper hand, leveraging existing equity in the upsizing or downsizing process. All this played out a bit differently across Kentucky: Louisville and Lexington saw the fastest climbs in prices and the fiercest bidding wars, while rural Kentucky offered lower prices but fewer choices.

For Kentucky’s budget-conscious buyers, preparation and flexibility proved crucial – getting pre-approved, being ready to move fast, and sometimes compromising on wish lists became standard advice. Many such buyers succeeded in attaining homeownership, thanks in part to supportive programs (like Kentucky’s first-time buyer assistance) and a willingness to explore different property types or locations.

Going forward, Kentucky’s housing market will need to address its affordability puzzle to keep homeownership within reach for the middle class. This may involve policy efforts to increase housing stock, continued low-down-payment financing options, and creative solutions from both the public and private sectors. Even in a challenging market, the dream of homeownership remains strong – and as the trends show, Kentucky’s households have been resourceful and resilient in pursuing that dream.

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