Real estate website Trulia released its quarterly Trulia Inventory and Price Watch Thursday. The survey found that starter and trade-up home inventory fell at double-digit rates, while premium home inventory saw a 5.9% drop – its biggest decline in four years. Trulia also found that homes were less affordable now than at any time since the company began keeping track in 2012.
Overall US housing inventory saw its steepest decline since 2013 in the fourth quarter, plummeting 10.5% year over year. The largest decline was among starter homes, but premium home inventory’s 5.9% drop was also “uncharacteristically large,” according to Trulia. Metro areas that saw the biggest inventory declines were San Jose, Calif., Salt Lake City and Rochester, N.Y.
Despite steep declines, however, premium homes still account for the largest share of the market than during any quarter since 2012 – 53.1% of all available inventory. That’s a gut-punch for first-time buyers looking for starter homes, which are becoming rarer and rarer in many markets. Adding to the pain is decreasing affordability.
“While the number of premium homes on the market have seen a sharp fall, they continue to make up a larger share of the for-sale market, which spells trouble for first-time homebuyers,” said Ralph McLaughlin, chief economist for Trulia. “Coupled with record-low inventory, saving enough money for a down payment will continue to be their biggest obstacle to homeownership.”
Currently, first-time homebuyers would need to spend an average of 39.8% of their monthly income to buy a starter home, up 1.7% from this time last year. Trade-up and premium buyers, meanwhile, would need to spend 25.8% and 14% of their average monthly incomes, respectively.
However, McLaughlin said the situation wasn’t entirely grim.
“While the inventory crunch continues, I’m cautiously optimistic that 2018 will be a year for inventory rebound,” he said. “Not only is American optimism about selling homes at levels not seen since 2014, 16% of homeowners plan to sell a home in the next two years. If we see them follow through, there may finally be an uptick in inventory.”
This one thing wiped out 270,000 from housing inventory
Inventory issues to shape 2018 housing market
Inventory is getting ever tighter, even as affordability hits record lows, according to new data.