The FINANCIAL — On March 21 Trulia, a home and neighborhood site that helps homebuyers and renters discover a place they’ll love to live, released the findings from its quarterly Trulia Inventory and Price Watch.
This quarter’s report found that national housing inventory rose 3.3% year-over-year, driven almost entirely by a 13.3% increase in premium homes. This is the first time that inventory has hit positive territory during the first quarter since 2015. However, starter home inventory plummeted, hitting its lowest level in at least six years, and amid a 9.6% year-over-year increase in median list price.
Starter Homes Becoming Non-Starter for Many Buyers
Not only will first-time buyers face fierce competition in a tighter and pricier housing market, the quality of available starter homes appears to have diminished. Today, starter homes are less likely to be move-in ready with fixer-uppers making up 11.2% of the market, up from 10.3% in 2012. Most notably, Camden, N.J, Philadelphia, and Oklahoma City saw their share of fixer-uppers among starter homes rise the most. Moreover, starter homes nationally are nine years older on average and about 2% smaller in terms of square footage, shrinking to 1,187 square feet from 1,211 square feet six years ago.
Starter Homes Completely Out of Reach in San Francisco Bay Area, Los Angeles, and Orange County
The ongoing inventory crunch continues to impact affordability across the country. Nationally, starter-home buyers now need to spend at least 41.2% of their income to buy a typical starter home – significantly more than the recommended amount. This 4.2 percentage point increase is the largest year-over-year rise on record. Regionally, California is home to the most unaffordable markets in the country. In fact, starter-home buyers in San Francisco, San Jose, Calif., and Los Angeles would need to spend more than 100% of their income to buy the median-priced starter home in those markets.
Quotes from Trulia’s Senior Economist Cheryl Young:
“First-time home buyers face a perfect storm this spring. Affordable, move-in ready starter homes have become harder to find amid rising home prices and mortgage rates. While new home construction hit a 10-year high in 2017, these units have not translated into starter home inventory just yet.”
“If you’re looking to buy a fixer upper, proceed with caution. It may seem like a reasonable starter home but may be a trade-up home in disguise. In tight markets where bidding wars are common, sellers have little incentive to upgrade their properties before listing them. First-time homebuyers should keep that in mind as they assess the hidden costs that comes with fixing up a home, especially if it’s an older home.”